Correlation Between Df Dent and Payden Absolute

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Can any of the company-specific risk be diversified away by investing in both Df Dent and Payden Absolute 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 Df Dent and Payden Absolute into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Df Dent Small and Payden Absolute Return, you can compare the effects of market volatilities on Df Dent and Payden Absolute 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 Df Dent with a short position of Payden Absolute. Check out your portfolio center. Please also check ongoing floating volatility patterns of Df Dent and Payden Absolute.

Diversification Opportunities for Df Dent and Payden Absolute

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between DFDSX and Payden is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Df Dent Small and Payden Absolute Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Absolute Return and Df Dent 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 Df Dent Small are associated (or correlated) with Payden Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Absolute Return has no effect on the direction of Df Dent i.e., Df Dent and Payden Absolute go up and down completely randomly.

Pair Corralation between Df Dent and Payden Absolute

Assuming the 90 days horizon Df Dent Small is expected to generate 4.59 times more return on investment than Payden Absolute. However, Df Dent is 4.59 times more volatile than Payden Absolute Return. It trades about 0.05 of its potential returns per unit of risk. Payden Absolute Return is currently generating about -0.05 per unit of risk. If you would invest  2,611  in Df Dent Small on September 13, 2024 and sell it today you would earn a total of  22.00  from holding Df Dent Small or generate 0.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Df Dent Small  vs.  Payden Absolute Return

 Performance 
       Timeline  
Df Dent Small 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Df Dent Small are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Df Dent may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Payden Absolute Return 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Payden Absolute Return are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Payden Absolute is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Df Dent and Payden Absolute Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Df Dent and Payden Absolute

The main advantage of trading using opposite Df Dent and Payden Absolute positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Df Dent position performs unexpectedly, Payden Absolute 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 Payden Absolute will offset losses from the drop in Payden Absolute's long position.
The idea behind Df Dent Small and Payden Absolute Return 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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