Correlation Between Pax Small and Pax Esg

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

Diversification Opportunities for Pax Small and Pax Esg

0.9

Correlation Coefficient

Pax Small  Pax Esg

Almost no diversification

The 3 months correlation between Pax and Pax is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Pax Small Cap and Pax Esg Beta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Esg Beta 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 Esg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Esg Beta has no effect on the direction of Pax Small i.e., Pax Small and Pax Esg go up and down completely randomly.

Pair Corralation between Pax Small and Pax Esg

Assuming the 90 days horizon Pax Small Cap is expected to generate 1.48 times more return on investment than Pax Esg. However, Pax Small is 1.48 times more volatile than Pax Esg Beta. It trades about 0.2 of its potential returns per unit of risk. Pax Esg Beta is currently generating about 0.19 per unit of risk. If you would invest  1,708  in Pax Small Cap on September 5, 2024 and sell it today you would earn a total of  238.00  from holding Pax Small Cap or generate 13.93% return on investment over 90 days.

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

Pax Small Cap  vs.  Pax Esg Beta

Pax Small Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pax Small Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Pax Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pax Esg Beta

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pax Esg Beta are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Pax Esg may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pax Small and Pax Esg

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

The idea behind Pax Small Cap and Pax Esg Beta 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.