Correlation Between Pax Msci and Pax Global

Can any of the company-specific risk be diversified away by investing in both Pax Msci and Pax Global 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 Global 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 Global Environmental, you can compare the effects of market volatilities on Pax Msci and Pax Global 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 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pax Msci and Pax Global.

Diversification Opportunities for Pax Msci and Pax Global

0.53

Correlation Coefficient

Pax Msci  Pax Global

Very weak diversification

The 3 months correlation between Pax and Pax is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Pax Msci Eafe and Pax Global Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Global Environmental 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Global Environmental has no effect on the direction of Pax Msci i.e., Pax Msci and Pax Global go up and down completely randomly.

Pair Corralation between Pax Msci and Pax Global

Assuming the 90 days horizon Pax Msci is expected to generate 3.19 times less return on investment than Pax Global. In addition to that, Pax Msci is 1.16 times more volatile than Pax Global Environmental. It trades about 0.02 of its total potential returns per unit of risk. Pax Global Environmental is currently generating about 0.09 per unit of volatility. If you would invest  2,463  in Pax Global Environmental on September 4, 2024 and sell it today you would earn a total of  33.00  from holding Pax Global Environmental or generate 1.34% return on investment over 90 days.

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

Pax Msci Eafe  vs.  Pax Global Environmental

Pax Msci Eafe

Risk-Adjusted Performance

0 of 100

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 Global Environmental

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pax Global Environmental are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pax Global 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 Msci and Pax Global

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

The idea behind Pax Msci Eafe and Pax Global Environmental 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.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.