Correlation Between Pax Small and Green Century

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

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

Diversification Opportunities for Pax Small and Green Century

0.78

Correlation Coefficient

Pax Small  Green Century

Poor diversification

The 3 months correlation between Pax and Green is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Pax Small Cap and Green Century Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Century Balanced and Pax Small 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 Small Cap are associated (or correlated) with Green Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Century Balanced has no effect on the direction of Pax Small i.e., Pax Small and Green Century go up and down completely randomly.

Pair Corralation between Pax Small and Green Century

Assuming the 90 days horizon Pax Small Cap is expected to generate 1.78 times more return on investment than Green Century. However, Pax Small is 1.78 times more volatile than Green Century Balanced. It trades about 0.03 of its potential returns per unit of risk. Green Century Balanced is currently generating about 0.03 per unit of risk. If you would invest  1,540  in Pax Small Cap on October 26, 2024 and sell it today you would earn a total of  260.00  from holding Pax Small Cap or generate 16.88% return on investment over 90 days.

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

Pax Small Cap  vs.  Green Century Balanced

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.

Green Century Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Century Balanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Green Century 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 Small and Green Century

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

The idea behind Pax Small Cap and Green Century Balanced 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.