Correlation Between American Funds and Pax Global

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Can any of the company-specific risk be diversified away by investing in both American Funds and Pax Global 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 American Funds and Pax Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Retirement and Pax Global Environmental, you can compare the effects of market volatilities on American Funds and Pax Global 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 American Funds with a short position of Pax Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Pax Global.

Diversification Opportunities for American Funds and Pax Global

0.67
  Correlation Coefficient

Poor diversification

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

Pair Corralation between American Funds and Pax Global

Assuming the 90 days horizon American Funds Retirement is expected to generate 0.44 times more return on investment than Pax Global. However, American Funds Retirement is 2.29 times less risky than Pax Global. It trades about 0.09 of its potential returns per unit of risk. Pax Global Environmental is currently generating about 0.01 per unit of risk. If you would invest  1,177  in American Funds Retirement on October 25, 2024 and sell it today you would earn a total of  95.00  from holding American Funds Retirement or generate 8.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.51%
ValuesDaily Returns

American Funds Retirement  vs.  Pax Global Environmental

 Performance 
       Timeline  
American Funds Retirement 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Retirement are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Pax Global Environmental 

Risk-Adjusted Performance

0 of 100

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

American Funds and Pax Global Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Funds and Pax Global

The main advantage of trading using opposite American Funds and Pax Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Pax Global 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 Global will offset losses from the drop in Pax Global's long position.
The idea behind American Funds Retirement and Pax Global Environmental 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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