Correlation Between Pax Large and Pax Balanced

Can any of the company-specific risk be diversified away by investing in both Pax Large and Pax Balanced 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 Balanced 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 Balanced Fund, you can compare the effects of market volatilities on Pax Large and Pax Balanced 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 Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pax Large and Pax Balanced.

Diversification Opportunities for Pax Large and Pax Balanced

0.67

Correlation Coefficient

Pax Large  Pax Balanced

Poor diversification

The 3 months correlation between Pax and Pax is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Pax Large Cap and Pax Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Balanced 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 Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Balanced has no effect on the direction of Pax Large i.e., Pax Large and Pax Balanced go up and down completely randomly.

Pair Corralation between Pax Large and Pax Balanced

Assuming the 90 days horizon Pax Large Cap is expected to generate 1.61 times more return on investment than Pax Balanced. However, Pax Large is 1.61 times more volatile than Pax Balanced Fund. It trades about 0.1 of its potential returns per unit of risk. Pax Balanced Fund is currently generating about 0.06 per unit of risk. If you would invest  1,492  in Pax Large Cap on September 12, 2024 and sell it today you would earn a total of  64.00  from holding Pax Large Cap or generate 4.29% return on investment over 90 days.

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

Pax Large Cap  vs.  Pax Balanced Fund

Pax Large Cap

Risk-Adjusted Performance

7 of 100

OK

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

Pax Balanced

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pax Balanced Fund are ranked lower than 4 (%) 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.

Pair Trading with Pax Large and Pax Balanced

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

The idea behind Pax Large Cap and Pax Balanced Fund 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.