Correlation Between Pax Msci and Pax Small

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

Diversification Opportunities for Pax Msci and Pax Small

-0.62
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Pax and Pax is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Pax Msci Eafe and Pax Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Small Cap and Pax Msci 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 Msci Eafe are associated (or correlated) with Pax Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Small Cap has no effect on the direction of Pax Msci i.e., Pax Msci and Pax Small go up and down completely randomly.

Pair Corralation between Pax Msci and Pax Small

Assuming the 90 days horizon Pax Msci Eafe is expected to under-perform the Pax Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Pax Msci Eafe is 1.77 times less risky than Pax Small. The mutual fund trades about -0.21 of its potential returns per unit of risk. The Pax Small Cap is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,790  in Pax Small Cap on August 25, 2024 and sell it today you would earn a total of  138.00  from holding Pax Small Cap or generate 7.71% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Pax Msci Eafe  vs.  Pax Small Cap

 Performance 
       Timeline  
Pax Msci Eafe 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Pax Small Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Pax Small may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pax Msci and Pax Small Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pax Msci and Pax Small

The main advantage of trading using opposite Pax Msci and Pax Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pax Msci position performs unexpectedly, Pax Small 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 Small will offset losses from the drop in Pax Small's long position.
The idea behind Pax Msci Eafe and Pax Small Cap 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 Stocks Directory module to find actively traded stocks across global markets.

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