Correlation Between Newbury Street and Pax Balanced

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

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

Diversification Opportunities for Newbury Street and Pax Balanced

0.03

Correlation Coefficient

Newbury Street  Pax Balanced

Significant diversification

The 3 months correlation between Newbury and Pax is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Newbury Street Acquisition and Pax Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Balanced and Newbury Street 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 Newbury Street Acquisition are associated (or correlated) with Pax Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Balanced has no effect on the direction of Newbury Street i.e., Newbury Street and Pax Balanced go up and down completely randomly.

Pair Corralation between Newbury Street and Pax Balanced

Assuming the 90 days horizon Newbury Street Acquisition is expected to generate 36.56 times more return on investment than Pax Balanced. However, Newbury Street is 36.56 times more volatile than Pax Balanced Fund. It trades about 0.05 of its potential returns per unit of risk. Pax Balanced Fund is currently generating about 0.27 per unit of risk. If you would invest  7.69  in Newbury Street Acquisition on February 26, 2024 and sell it today you would lose (0.69) from holding Newbury Street Acquisition or give up 8.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	81.82%
Values	Daily Returns

Newbury Street Acquisition  vs.  Pax Balanced Fund

Newbury Street Acqui

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Newbury Street Acquisition are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Newbury Street showed solid returns over the last few months and may actually be approaching a breakup point.

Pax Balanced

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pax Balanced Fund are ranked lower than 6 (%) 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.

Pair Trading with Newbury Street and Pax Balanced

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

The idea behind Newbury Street Acquisition and Pax Balanced Fund 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.