Correlation Between Pace Municipal and Aggressive Balanced
Can any of the company-specific risk be diversified away by investing in both Pace Municipal and Aggressive Balanced 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 Municipal and Aggressive Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pace Municipal Fixed and Aggressive Balanced Allocation, you can compare the effects of market volatilities on Pace Municipal and Aggressive Balanced 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 Municipal with a short position of Aggressive Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Municipal and Aggressive Balanced.
Diversification Opportunities for Pace Municipal and Aggressive Balanced
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pace and Aggressive is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Pace Municipal Fixed and Aggressive Balanced Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Balanced and Pace Municipal 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 Municipal Fixed are associated (or correlated) with Aggressive Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Balanced has no effect on the direction of Pace Municipal i.e., Pace Municipal and Aggressive Balanced go up and down completely randomly.
Pair Corralation between Pace Municipal and Aggressive Balanced
Assuming the 90 days horizon Pace Municipal is expected to generate 1.08 times less return on investment than Aggressive Balanced. But when comparing it to its historical volatility, Pace Municipal Fixed is 4.78 times less risky than Aggressive Balanced. It trades about 0.32 of its potential returns per unit of risk. Aggressive Balanced Allocation is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,270 in Aggressive Balanced Allocation on May 28, 2025 and sell it today you would earn a total of 11.00 from holding Aggressive Balanced Allocation or generate 0.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pace Municipal Fixed vs. Aggressive Balanced Allocation
Performance |
| Timeline |
| Pace Municipal Fixed |
| Aggressive Balanced |
Pace Municipal and Aggressive Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace Municipal and Aggressive Balanced
The main advantage of trading using opposite Pace Municipal and Aggressive Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace Municipal position performs unexpectedly, Aggressive Balanced 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 Aggressive Balanced will offset losses from the drop in Aggressive Balanced's long position.| Pace Municipal vs. Lord Abbett Intermediate | Pace Municipal vs. Intermediate Term Tax Free Bond | Pace Municipal vs. Gurtin California Muni | Pace Municipal vs. Franklin Adjustable Government |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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