Correlation Between Pace International and Equity Growth

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

Diversification Opportunities for Pace International and Equity Growth

0.98

Correlation Coefficient

Pace International  Equity Growth

Almost no diversification

The 3 months correlation between Pace and Equity is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Pace International Emerging and Equity Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Growth 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 Equity Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Growth has no effect on the direction of Pace International i.e., Pace International and Equity Growth go up and down completely randomly.

Pair Corralation between Pace International and Equity Growth

Assuming the 90 days horizon Pace International is expected to generate 1.04 times less return on investment than Equity Growth. But when comparing it to its historical volatility, Pace International Emerging is 1.22 times less risky than Equity Growth. It trades about 0.33 of its potential returns per unit of risk. Equity Growth Fund is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  3,129  in Equity Growth Fund on May 1, 2025 and sell it today you would earn a total of  455.00  from holding Equity Growth Fund or generate 14.54% return on investment over 90 days.

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

Pace International Emerging  vs.  Equity Growth Fund

Pace International

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Pace International Emerging are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Pace International showed solid returns over the last few months and may actually be approaching a breakup point.

Equity Growth

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Equity Growth Fund are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Equity Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pace International and Equity Growth

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

The idea behind Pace International Emerging and Equity Growth 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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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.