Correlation Between Pax Small and Portfolio

Can any of the company-specific risk be diversified away by investing in both Pax Small and Portfolio 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 Portfolio 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 Portfolio 21 Global, you can compare the effects of market volatilities on Pax Small and Portfolio 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 Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pax Small and Portfolio.

Diversification Opportunities for Pax Small and Portfolio

0.72

Correlation Coefficient

Pax Small  Portfolio

Poor diversification

The 3 months correlation between Pax and Portfolio is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Pax Small Cap and Portfolio 21 Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portfolio 21 Global 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 Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portfolio 21 Global has no effect on the direction of Pax Small i.e., Pax Small and Portfolio go up and down completely randomly.

Pair Corralation between Pax Small and Portfolio

Assuming the 90 days horizon Pax Small Cap is expected to generate 0.87 times more return on investment than Portfolio. However, Pax Small Cap is 1.15 times less risky than Portfolio. It trades about 0.01 of its potential returns per unit of risk. Portfolio 21 Global is currently generating about -0.11 per unit of risk. If you would invest  1,799  in Pax Small Cap on October 26, 2024 and sell it today you would earn a total of  1.00  from holding Pax Small Cap or generate 0.06% 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.  Portfolio 21 Global

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.

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Pax Small and Portfolio

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

The idea behind Pax Small Cap and Portfolio 21 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.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.