Correlation Between Oberweis Emerging and Pax E

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

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

Diversification Opportunities for Oberweis Emerging and Pax E

0.63

Correlation Coefficient

Oberweis Emerging  Pax E

Poor diversification

The 3 months correlation between Oberweis and Pax is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Oberweis Emerging Growth 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 Oberweis Emerging 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 Oberweis Emerging Growth 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 Oberweis Emerging i.e., Oberweis Emerging and Pax E go up and down completely randomly.

Pair Corralation between Oberweis Emerging and Pax E

Assuming the 90 days horizon Oberweis Emerging Growth is expected to generate 3.99 times more return on investment than Pax E. However, Oberweis Emerging is 3.99 times more volatile than Pax E Bond. It trades about 0.14 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  3,025  in Oberweis Emerging Growth on October 27, 2024 and sell it today you would earn a total of  90.00  from holding Oberweis Emerging Growth or generate 2.98% return on investment over 90 days.

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

Oberweis Emerging Growth  vs.  Pax E Bond

Oberweis Emerging Growth

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oberweis Emerging Growth are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Oberweis Emerging 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 Oberweis Emerging and Pax E

The main advantage of trading using opposite Oberweis Emerging and Pax E positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oberweis Emerging 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 Oberweis Emerging Growth 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.