Correlation Between Pax Large and Pax Core

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

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

Diversification Opportunities for Pax Large and Pax Core

0.66

Correlation Coefficient

Pax Large  Pax Core

Poor diversification

The 3 months correlation between Pax and Pax is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Pax Large Cap 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 Pax Large 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 Pax Large Cap are associated (or correlated) with Pax Core. 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 Pax Large i.e., Pax Large and Pax Core go up and down completely randomly.

Pair Corralation between Pax Large and Pax Core

Assuming the 90 days horizon Pax Large Cap is expected to under-perform the Pax Core. In addition to that, Pax Large is 12.71 times more volatile than Pax E Bond. It trades about -0.28 of its total potential returns per unit of risk. Pax E Bond is currently generating about -0.46 per unit of volatility. If you would invest  884.00  in Pax E Bond on October 12, 2024 and sell it today you would lose (20.00) from holding Pax E Bond or give up 2.26% of portfolio value over 90 days.

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

Pax Large Cap  vs.  Pax E Bond

Pax Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pax Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's essential indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund 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 Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pax Large and Pax Core

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

The idea behind Pax Large Cap 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.