Correlation Between Steelcase and PAX Global

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

By analyzing existing cross correlation between Steelcase and PAX Global Technology, you can compare the effects of market volatilities on Steelcase 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 Steelcase with a short position of PAX Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steelcase and PAX Global.

Diversification Opportunities for Steelcase and PAX Global

-0.34

Correlation Coefficient

Steelcase  PAX Global

Very good diversification

The 3 months correlation between Steelcase and PAX is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Steelcase and PAX Global Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAX Global Technology and Steelcase 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 Steelcase 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 Technology has no effect on the direction of Steelcase i.e., Steelcase and PAX Global go up and down completely randomly.

Pair Corralation between Steelcase and PAX Global

Considering the 90-day investment horizon Steelcase is expected to under-perform the PAX Global. But the stock apears to be less risky and, when comparing its historical volatility, Steelcase is 2.23 times less risky than PAX Global. The stock trades about -0.04 of its potential returns per unit of risk. The PAX Global Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  58.00  in PAX Global Technology on September 17, 2024 and sell it today you would earn a total of  11.00  from holding PAX Global Technology or generate 18.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Steelcase  vs.  PAX Global Technology

Steelcase

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steelcase has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Steelcase is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

PAX Global Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PAX Global Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, PAX Global reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steelcase and PAX Global

The main advantage of trading using opposite Steelcase and PAX Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steelcase 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 Steelcase and PAX Global Technology 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..