Correlation Between Pace International and Classic Value
Can any of the company-specific risk be diversified away by investing in both Pace International and Classic Value 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 Classic Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pace International Emerging and Classic Value Fund, you can compare the effects of market volatilities on Pace International and Classic Value 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 Classic Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace International and Classic Value.
Diversification Opportunities for Pace International and Classic Value
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pace and Classic is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Pace International Emerging and Classic Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Classic Value 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 Emerging are associated (or correlated) with Classic Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Classic Value has no effect on the direction of Pace International i.e., Pace International and Classic Value go up and down completely randomly.
Pair Corralation between Pace International and Classic Value
Assuming the 90 days horizon Pace International Emerging is expected to generate 0.68 times more return on investment than Classic Value. However, Pace International Emerging is 1.48 times less risky than Classic Value. It trades about 0.24 of its potential returns per unit of risk. Classic Value Fund is currently generating about 0.12 per unit of risk. If you would invest 1,428 in Pace International Emerging on May 27, 2025 and sell it today you would earn a total of 148.00 from holding Pace International Emerging or generate 10.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pace International Emerging vs. Classic Value Fund
Performance |
| Timeline |
| Pace International |
| Classic Value |
Pace International and Classic Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace International and Classic Value
The main advantage of trading using opposite Pace International and Classic Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace International position performs unexpectedly, Classic Value 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 Classic Value will offset losses from the drop in Classic Value's long position.The idea behind Pace International Emerging and Classic Value Fund 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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Check out your portfolio center.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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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