Correlation Between Ford and Payden Absolute
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Payden Absolute into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Payden Absolute Return, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Payden Absolute. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Payden Absolute.
Diversification Opportunities for Ford and Payden Absolute
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ford and Payden is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and Payden Absolute go up and down completely randomly.
Pair Corralation between Ford and Payden Absolute
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Payden Absolute. In addition to that, Ford is 28.55 times more volatile than Payden Absolute Return. It trades about -0.02 of its total potential returns per unit of risk. Payden Absolute Return is currently generating about 0.32 per unit of volatility. If you would invest 892.00 in Payden Absolute Return on November 3, 2024 and sell it today you would earn a total of 56.00 from holding Payden Absolute Return or generate 6.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Ford Motor vs. Payden Absolute Return
Performance |
| Timeline |
| Ford Motor |
| Payden Absolute Return |
Ford and Payden Absolute Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Payden Absolute
The main advantage of trading using opposite Ford and Payden Absolute positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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.| Payden Absolute vs. Health Care Ultrasector | Payden Absolute vs. Live Oak Health | Payden Absolute vs. Hartford Healthcare Hls | Payden Absolute vs. Lord Abbett Health |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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