Correlation Between Pax Small and Pax Core
Can any of the company-specific risk be diversified away by investing in both Pax Small 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 Small 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 Small Cap and Pax E Bond, you can compare the effects of market volatilities on Pax Small 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 Small with a short position of Pax Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pax Small and Pax Core.
Diversification Opportunities for Pax Small and Pax Core
Excellent diversification
The 3 months correlation between Pax and Pax is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Pax Small Cap 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 Small 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 Small Cap 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 Small i.e., Pax Small and Pax Core go up and down completely randomly.
Pair Corralation between Pax Small and Pax Core
Assuming the 90 days horizon Pax Small Cap is expected to generate 4.44 times more return on investment than Pax Core. However, Pax Small is 4.44 times more volatile than Pax E Bond. It trades about 0.25 of its potential returns per unit of risk. Pax E Bond is currently generating about -0.08 per unit of risk. 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 Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pax Small Cap vs. Pax E Bond
Performance |
| Timeline |
| Pax Small Cap |
| Pax E Bond |
Pax Small and Pax Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pax Small and Pax Core
The main advantage of trading using opposite Pax Small and Pax Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pax Small 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 Small vs. Pax Global Environmental | Pax Small vs. Pax Esg Beta | Pax Small vs. Pax Msci Eafe | Pax Small vs. Pax High Yield |
| Pax Core vs. Eagle Mlp Strategy | Pax Core vs. Pace International Emerging | Pax Core vs. Franklin Emerging Market | Pax Core vs. Transamerica Emerging Markets |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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