Correlation Between Pax Balanced and Tcw Core

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

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

Diversification Opportunities for Pax Balanced and Tcw Core

0.2

Correlation Coefficient

Pax Balanced  Tcw Core

Modest diversification

The 3 months correlation between Pax and Tcw is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Pax Balanced Fund and Tcw E Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tcw E Fixed and Pax Balanced 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 Balanced Fund are associated (or correlated) with Tcw Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tcw E Fixed has no effect on the direction of Pax Balanced i.e., Pax Balanced and Tcw Core go up and down completely randomly.

Pair Corralation between Pax Balanced and Tcw Core

Assuming the 90 days horizon Pax Balanced Fund is expected to generate 1.33 times more return on investment than Tcw Core. However, Pax Balanced is 1.33 times more volatile than Tcw E Fixed. It trades about 0.09 of its potential returns per unit of risk. Tcw E Fixed is currently generating about -0.06 per unit of risk. If you would invest  2,633  in Pax Balanced Fund on September 2, 2024 and sell it today you would earn a total of  71.00  from holding Pax Balanced Fund or generate 2.7% return on investment over 90 days.

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

Pax Balanced Fund  vs.  Tcw E Fixed

Pax Balanced

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pax Balanced Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. 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.

Tcw E Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Pax Balanced and Tcw Core

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

The idea behind Pax Balanced Fund and Tcw E Fixed 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.