Correlation Between Energy Basic and Pacific Funds

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

By analyzing existing cross correlation between Energy Basic Materials and Pacific Funds Esg, you can compare the effects of market volatilities on Energy Basic and Pacific Funds 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 Energy Basic with a short position of Pacific Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Basic and Pacific Funds.

Diversification Opportunities for Energy Basic and Pacific Funds

0.51

Correlation Coefficient

Energy Basic  Pacific Funds

Very weak diversification

The 3 months correlation between Energy and Pacific is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Energy Basic Materials and Pacific Funds Esg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Funds Esg and Energy Basic 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 Energy Basic Materials are associated (or correlated) with Pacific Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Funds Esg has no effect on the direction of Energy Basic i.e., Energy Basic and Pacific Funds go up and down completely randomly.

Pair Corralation between Energy Basic and Pacific Funds

Assuming the 90 days horizon Energy Basic Materials is expected to under-perform the Pacific Funds. In addition to that, Energy Basic is 4.41 times more volatile than Pacific Funds Esg. It trades about -0.4 of its total potential returns per unit of risk. Pacific Funds Esg is currently generating about -0.5 per unit of volatility. If you would invest  875.00  in Pacific Funds Esg on October 5, 2024 and sell it today you would lose (19.00) from holding Pacific Funds Esg or give up 2.17% of portfolio value over 90 days.

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

Energy Basic Materials  vs.  Pacific Funds Esg

Energy Basic Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Basic Materials has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental drivers remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pacific Funds Esg

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Funds Esg has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Pacific Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Energy Basic and Pacific Funds

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

The idea behind Energy Basic Materials and Pacific Funds Esg 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.