Correlation Between Pax Balanced and Pax Ellevate

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

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

Diversification Opportunities for Pax Balanced and Pax Ellevate

0.68

Correlation Coefficient

Pax Balanced  Pax Ellevate

Poor diversification

The 3 months correlation between Pax and Pax is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Pax Balanced Fund and Pax Ellevate Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Ellevate Global and Pax Balanced 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 Balanced Fund are associated (or correlated) with Pax Ellevate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Ellevate Global has no effect on the direction of Pax Balanced i.e., Pax Balanced and Pax Ellevate go up and down completely randomly.

Pair Corralation between Pax Balanced and Pax Ellevate

Assuming the 90 days horizon Pax Balanced is expected to generate 1.6 times less return on investment than Pax Ellevate. But when comparing it to its historical volatility, Pax Balanced Fund is 1.48 times less risky than Pax Ellevate. It trades about 0.09 of its potential returns per unit of risk. Pax Ellevate Global is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,274  in Pax Ellevate Global on September 3, 2024 and sell it today you would earn a total of  314.00  from holding Pax Ellevate Global or generate 9.59% return on investment over 90 days.

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

Pax Balanced Fund  vs.  Pax Ellevate Global

Pax Balanced

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pax Balanced Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pax Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pax Ellevate Global

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pax Ellevate Global are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Pax Ellevate 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 Balanced and Pax Ellevate

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

The idea behind Pax Balanced Fund and Pax Ellevate Global 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.