Correlation Between Value Line and Pax Balanced

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

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

Diversification Opportunities for Value Line and Pax Balanced

0.09

Correlation Coefficient

Value Line  Pax Balanced

Significant diversification

The 3 months correlation between Value and Pax is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Value Line Income and Pax Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Balanced and Value Line 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 Value Line Income are associated (or correlated) with Pax Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Balanced has no effect on the direction of Value Line i.e., Value Line and Pax Balanced go up and down completely randomly.

Pair Corralation between Value Line and Pax Balanced

Assuming the 90 days horizon Value Line Income is expected to generate 1.4 times more return on investment than Pax Balanced. However, Value Line is 1.4 times more volatile than Pax Balanced Fund. It trades about 0.06 of its potential returns per unit of risk. Pax Balanced Fund is currently generating about -0.08 per unit of risk. If you would invest  1,286  in Value Line Income on October 22, 2024 and sell it today you would earn a total of  13.00  from holding Value Line Income or generate 1.01% return on investment over 90 days.

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

Value Line Income  vs.  Pax Balanced Fund

Value Line Income

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Value Line Income are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Value Line may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pax Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Value Line and Pax Balanced

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

The idea behind Value Line Income and Pax Balanced Fund 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.