Correlation Between Portfolio and Pax Small

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

By analyzing existing cross correlation between Portfolio 21 Global and Pax Small Cap, you can compare the effects of market volatilities on Portfolio and Pax Small 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 Portfolio with a short position of Pax Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Portfolio and Pax Small.

Diversification Opportunities for Portfolio and Pax Small

0.42

Correlation Coefficient

Portfolio  Pax Small

Very weak diversification

The 3 months correlation between Portfolio and Pax is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Portfolio 21 Global and Pax Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Small Cap and Portfolio 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 Portfolio 21 Global are associated (or correlated) with Pax Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Small Cap has no effect on the direction of Portfolio i.e., Portfolio and Pax Small go up and down completely randomly.

Pair Corralation between Portfolio and Pax Small

Assuming the 90 days horizon Portfolio 21 Global is expected to under-perform the Pax Small. In addition to that, Portfolio is 1.8 times more volatile than Pax Small Cap. It trades about -0.29 of its total potential returns per unit of risk. Pax Small Cap is currently generating about -0.38 per unit of volatility. If you would invest  1,926  in Pax Small Cap on October 11, 2024 and sell it today you would lose (191.00) from holding Pax Small Cap or give up 9.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Portfolio 21 Global  vs.  Pax Small Cap

Portfolio 21 Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Portfolio 21 Global 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 basic 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 Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Portfolio and Pax Small

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

The idea behind Portfolio 21 Global and Pax Small Cap 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.