Correlation Between Pace Mortgage and Pace International

Can any of the company-specific risk be diversified away by investing in both Pace Mortgage and Pace International 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 Mortgage and Pace International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pace Mortgage Backed Securities and Pace International Fixed, you can compare the effects of market volatilities on Pace Mortgage and Pace International 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 Mortgage with a short position of Pace International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Mortgage and Pace International.

Diversification Opportunities for Pace Mortgage and Pace International

0.97

Correlation Coefficient

Pace Mortgage  Pace International

Almost no diversification

The 3 months correlation between Pace and Pace is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Pace Mortgage Backed Securitie and Pace International Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace International Fixed and Pace Mortgage 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 Mortgage Backed Securities are associated (or correlated) with Pace International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace International Fixed has no effect on the direction of Pace Mortgage i.e., Pace Mortgage and Pace International go up and down completely randomly.

Pair Corralation between Pace Mortgage and Pace International

Assuming the 90 days horizon Pace Mortgage Backed Securities is expected to under-perform the Pace International. But the mutual fund apears to be less risky and, when comparing its historical volatility, Pace Mortgage Backed Securities is 1.05 times less risky than Pace International. The mutual fund trades about -0.3 of its potential returns per unit of risk. The Pace International Fixed is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest  791.00  in Pace International Fixed on September 27, 2024 and sell it today you would lose (12.00) from holding Pace International Fixed or give up 1.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Pace Mortgage Backed Securitie  vs.  Pace International Fixed

Pace Mortgage Backed

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pace International Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pace International Fixed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pace International 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 Mortgage and Pace International

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

The idea behind Pace Mortgage Backed Securities and Pace International 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.