Correlation Between Pace International and Pace Municipal

Can any of the company-specific risk be diversified away by investing in both Pace International and Pace Municipal at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Pace International and Pace Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pace International Equity and Pace Municipal Fixed, you can compare the effects of market volatilities on Pace International and Pace Municipal and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Pace International with a short position of Pace Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace International and Pace Municipal.

Diversification Opportunities for Pace International and Pace Municipal

0.31

Correlation Coefficient

Pace International  Pace Municipal

Weak diversification

The 3 months correlation between Pace and Pace is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Pace International Equity and Pace Municipal Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Municipal Fixed and Pace International is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Pace International Equity are associated (or correlated) with Pace Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Municipal Fixed has no effect on the direction of Pace International i.e., Pace International and Pace Municipal go up and down completely randomly.

Pair Corralation between Pace International and Pace Municipal

If you would invest  1,626  in Pace International Equity on December 28, 2024 and sell it today you would earn a total of  177.00  from holding Pace International Equity or generate 10.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	25.0%
Values	Daily Returns

Pace International Equity  vs.  Pace Municipal Fixed

Pace International Equity

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pace International Equity are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Pace International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pace Municipal Fixed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pace Municipal Fixed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pace Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pace International and Pace Municipal

The main advantage of trading using opposite Pace International and Pace Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace International position performs unexpectedly, Pace Municipal can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Pace Municipal will offset losses from the drop in Pace Municipal's long position.

The idea behind Pace International Equity and Pace Municipal Fixed pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.