Correlation Between Pax Core and Pax Esg

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

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

Diversification Opportunities for Pax Core and Pax Esg

-0.58

Correlation Coefficient

Pax Core  Pax Esg

Excellent diversification

The 3 months correlation between Pax and Pax is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Pax E Bond and Pax Esg Beta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Esg Beta and Pax Core 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 E Bond are associated (or correlated) with Pax Esg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Esg Beta has no effect on the direction of Pax Core i.e., Pax Core and Pax Esg go up and down completely randomly.

Pair Corralation between Pax Core and Pax Esg

Assuming the 90 days horizon Pax E Bond is expected to under-perform the Pax Esg. But the mutual fund apears to be less risky and, when comparing its historical volatility, Pax E Bond is 2.39 times less risky than Pax Esg. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Pax Esg Beta is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,578  in Pax Esg Beta on September 5, 2024 and sell it today you would earn a total of  217.00  from holding Pax Esg Beta or generate 8.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Pax E Bond  vs.  Pax Esg Beta

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 forward indicators, Pax Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pax Esg Beta

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pax Esg Beta are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Pax Esg may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pax Core and Pax Esg

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

The idea behind Pax E Bond and Pax Esg Beta 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.