Correlation Between Locorr Market and Pax Balanced

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

By analyzing existing cross correlation between Locorr Market Trend and Pax Balanced Fund, you can compare the effects of market volatilities on Locorr Market and Pax 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 Locorr Market with a short position of Pax Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Locorr Market and Pax Balanced.

Diversification Opportunities for Locorr Market and Pax Balanced

-0.27

Correlation Coefficient

Locorr Market  Pax Balanced

Very good diversification

The 3 months correlation between Locorr and Pax is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Locorr Market Trend and Pax Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Balanced and Locorr Market 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 Locorr Market Trend are associated (or correlated) with Pax Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Balanced has no effect on the direction of Locorr Market i.e., Locorr Market and Pax Balanced go up and down completely randomly.

Pair Corralation between Locorr Market and Pax Balanced

Assuming the 90 days horizon Locorr Market Trend is expected to under-perform the Pax Balanced. But the mutual fund apears to be less risky and, when comparing its historical volatility, Locorr Market Trend is 1.3 times less risky than Pax Balanced. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Pax Balanced Fund is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,722  in Pax Balanced Fund on October 26, 2024 and sell it today you would lose (2.00) from holding Pax Balanced Fund or give up 0.07% of portfolio value over 90 days.

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

Locorr Market Trend  vs.  Pax Balanced Fund

Locorr Market Trend

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Locorr Market Trend are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Locorr Market is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pax Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Locorr Market and Pax Balanced

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

The idea behind Locorr Market Trend and Pax Balanced 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.