Correlation Between Maryland Tax-free and Pace Small/medium

Can any of the company-specific risk be diversified away by investing in both Maryland Tax-free and Pace Small/medium 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 Maryland Tax-free and Pace Small/medium into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Maryland Tax Free Bond and Pace Smallmedium Growth, you can compare the effects of market volatilities on Maryland Tax-free and Pace Small/medium 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 Maryland Tax-free with a short position of Pace Small/medium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maryland Tax-free and Pace Small/medium.

Diversification Opportunities for Maryland Tax-free and Pace Small/medium

0.73

Correlation Coefficient

Maryland Tax-free  Pace Small/medium

Poor diversification

The 3 months correlation between Maryland and Pace is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Maryland Tax Free Bond and Pace Smallmedium Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Smallmedium Growth and Maryland Tax-free 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 Maryland Tax Free Bond are associated (or correlated) with Pace Small/medium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Smallmedium Growth has no effect on the direction of Maryland Tax-free i.e., Maryland Tax-free and Pace Small/medium go up and down completely randomly.

Pair Corralation between Maryland Tax-free and Pace Small/medium

Assuming the 90 days horizon Maryland Tax-free is expected to generate 10.22 times less return on investment than Pace Small/medium. But when comparing it to its historical volatility, Maryland Tax Free Bond is 4.6 times less risky than Pace Small/medium. It trades about 0.04 of its potential returns per unit of risk. Pace Smallmedium Growth is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,259  in Pace Smallmedium Growth on October 25, 2024 and sell it today you would earn a total of  77.00  from holding Pace Smallmedium Growth or generate 6.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Maryland Tax Free Bond  vs.  Pace Smallmedium Growth

Maryland Tax Free

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Maryland Tax Free Bond are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Maryland Tax-free is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pace Smallmedium Growth

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pace Smallmedium Growth are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Pace Small/medium may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Maryland Tax-free and Pace Small/medium

The main advantage of trading using opposite Maryland Tax-free and Pace Small/medium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maryland Tax-free position performs unexpectedly, Pace Small/medium 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 Small/medium will offset losses from the drop in Pace Small/medium's long position.

The idea behind Maryland Tax Free Bond and Pace Smallmedium Growth 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.