Correlation Between Pace Municipal and Transamerica Large

Can any of the company-specific risk be diversified away by investing in both Pace Municipal and Transamerica Large 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 Transamerica Large 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 Transamerica Large Growth, you can compare the effects of market volatilities on Pace Municipal and Transamerica Large 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 Transamerica Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Municipal and Transamerica Large.

Diversification Opportunities for Pace Municipal and Transamerica Large

-0.03

Correlation Coefficient

Pace Municipal  Transamerica Large

Good diversification

The 3 months correlation between Pace and Transamerica is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Pace Municipal Fixed and Transamerica Large Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Large Growth 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 Transamerica Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Large Growth has no effect on the direction of Pace Municipal i.e., Pace Municipal and Transamerica Large go up and down completely randomly.

Pair Corralation between Pace Municipal and Transamerica Large

Assuming the 90 days horizon Pace Municipal Fixed is expected to under-perform the Transamerica Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Pace Municipal Fixed is 5.95 times less risky than Transamerica Large. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Transamerica Large Growth is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,335  in Transamerica Large Growth on September 22, 2024 and sell it today you would earn a total of  264.00  from holding Transamerica Large Growth or generate 19.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Pace Municipal Fixed  vs.  Transamerica Large Growth

Pace Municipal Fixed

Risk-Adjusted Performance

0 of 100

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.

Transamerica Large Growth

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Large Growth are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Transamerica Large showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pace Municipal and Transamerica Large

The main advantage of trading using opposite Pace Municipal and Transamerica Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace Municipal position performs unexpectedly, Transamerica Large 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 Transamerica Large will offset losses from the drop in Transamerica Large's long position.

The idea behind Pace Municipal Fixed and Transamerica Large 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.