Correlation Between Fulcrum Diversified and Pax Msci

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

By analyzing existing cross correlation between Fulcrum Diversified Absolute and Pax Msci Eafe, you can compare the effects of market volatilities on Fulcrum Diversified and Pax Msci 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 Fulcrum Diversified with a short position of Pax Msci. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fulcrum Diversified and Pax Msci.

Diversification Opportunities for Fulcrum Diversified and Pax Msci

0.47

Correlation Coefficient

Fulcrum Diversified  Pax Msci

Very weak diversification

The 3 months correlation between Fulcrum and Pax is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Fulcrum Diversified Absolute and Pax Msci Eafe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Msci Eafe and Fulcrum Diversified 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 Fulcrum Diversified Absolute are associated (or correlated) with Pax Msci. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Msci Eafe has no effect on the direction of Fulcrum Diversified i.e., Fulcrum Diversified and Pax Msci go up and down completely randomly.

Pair Corralation between Fulcrum Diversified and Pax Msci

Assuming the 90 days horizon Fulcrum Diversified Absolute is expected to generate 0.48 times more return on investment than Pax Msci. However, Fulcrum Diversified Absolute is 2.1 times less risky than Pax Msci. It trades about 0.24 of its potential returns per unit of risk. Pax Msci Eafe is currently generating about 0.1 per unit of risk. If you would invest  932.00  in Fulcrum Diversified Absolute on October 23, 2024 and sell it today you would earn a total of  13.00  from holding Fulcrum Diversified Absolute or generate 1.39% return on investment over 90 days.

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

Fulcrum Diversified Absolute  vs.  Pax Msci Eafe

Fulcrum Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pax Msci Eafe

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fulcrum Diversified and Pax Msci

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

The idea behind Fulcrum Diversified Absolute and Pax Msci Eafe 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.