Correlation Between Pax Esg and Pax Core
Can any of the company-specific risk be diversified away by investing in both Pax Esg and Pax Core 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 Esg and Pax Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pax Esg Beta and Pax E Bond, you can compare the effects of market volatilities on Pax Esg and Pax Core 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 Esg with a short position of Pax Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pax Esg and Pax Core.
Diversification Opportunities for Pax Esg and Pax Core
Very poor diversification
The 3 months correlation between Pax and Pax is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Pax Esg Beta and Pax E Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax E Bond and Pax Esg 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 Esg Beta are associated (or correlated) with Pax Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax E Bond has no effect on the direction of Pax Esg i.e., Pax Esg and Pax Core go up and down completely randomly.
Pair Corralation between Pax Esg and Pax Core
Assuming the 90 days horizon Pax Esg Beta is expected to under-perform the Pax Core. In addition to that, Pax Esg is 2.12 times more volatile than Pax E Bond. It trades about -0.17 of its total potential returns per unit of risk. Pax E Bond is currently generating about 0.08 per unit of volatility. If you would invest 876.00 in Pax E Bond on August 29, 2024 and sell it today you would earn a total of 5.00 from holding Pax E Bond or generate 0.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Pax Esg Beta vs. Pax E Bond
Performance |
| Timeline |
| Pax Esg Beta |
| Pax E Bond |
Pax Esg and Pax Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pax Esg and Pax Core
The main advantage of trading using opposite Pax Esg and Pax Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pax Esg position performs unexpectedly, Pax Core 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 Core will offset losses from the drop in Pax Core's long position.| Pax Esg vs. HUMANA INC | Pax Esg vs. Aquagold International | Pax Esg vs. Barloworld Ltd ADR | Pax Esg vs. Morningstar Unconstrained Allocation |
| Pax Core vs. Ivy Natural Resources | Pax Core vs. Gmo Resources | Pax Core vs. Clearbridge Energy Mlp | Pax Core vs. Victory Global Natural |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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