Correlation Between Ultra Short and Pax E

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

By analyzing existing cross correlation between Ultra Short Income and Pax E Bond, you can compare the effects of market volatilities on Ultra Short and Pax E 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 Ultra Short with a short position of Pax E. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Short and Pax E.

Diversification Opportunities for Ultra Short and Pax E

-0.18

Correlation Coefficient

Ultra Short  Pax E

Good diversification

The 3 months correlation between Ultra and Pax is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Short Income and Pax E Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax E Bond and Ultra Short 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 Ultra Short Income are associated (or correlated) with Pax E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax E Bond has no effect on the direction of Ultra Short i.e., Ultra Short and Pax E go up and down completely randomly.

Pair Corralation between Ultra Short and Pax E

Assuming the 90 days horizon Ultra Short Income is expected to generate 0.31 times more return on investment than Pax E. However, Ultra Short Income is 3.22 times less risky than Pax E. It trades about 0.23 of its potential returns per unit of risk. Pax E Bond is currently generating about 0.04 per unit of risk. If you would invest  995.00  in Ultra Short Income on October 27, 2024 and sell it today you would earn a total of  4.00  from holding Ultra Short Income or generate 0.4% return on investment over 90 days.

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

Ultra Short Income  vs.  Pax E Bond

Ultra Short Income

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Short Income are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Ultra Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pax E Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ultra Short and Pax E

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

The idea behind Ultra Short Income and Pax E Bond 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.