Correlation Between M Large and Pax Large

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

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

Diversification Opportunities for M Large and Pax Large

0.99

Correlation Coefficient

M Large  Pax Large

No risk reduction

The 3 months correlation between MTCGX and Pax is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding M Large Cap and Pax Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Large Cap and M Large 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 M Large Cap are associated (or correlated) with Pax Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Large Cap has no effect on the direction of M Large i.e., M Large and Pax Large go up and down completely randomly.

Pair Corralation between M Large and Pax Large

Assuming the 90 days horizon M Large Cap is expected to generate 1.27 times more return on investment than Pax Large. However, M Large is 1.27 times more volatile than Pax Large Cap. It trades about 0.24 of its potential returns per unit of risk. Pax Large Cap is currently generating about 0.29 per unit of risk. If you would invest  3,144  in M Large Cap on May 6, 2025 and sell it today you would earn a total of  462.00  from holding M Large Cap or generate 14.69% return on investment over 90 days.

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

M Large Cap  vs.  Pax Large Cap

M Large Cap

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in M Large Cap are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, M Large showed solid returns over the last few months and may actually be approaching a breakup point.

Pax Large Cap

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pax Large Cap are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Pax Large showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with M Large and Pax Large

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

The idea behind M Large Cap and Pax Large Cap 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.