Correlation Between First Trust and Payden Government
Can any of the company-specific risk be diversified away by investing in both First Trust and Payden Government 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 First Trust and Payden Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Specialty and Payden Government Fund, you can compare the effects of market volatilities on First Trust and Payden Government 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 First Trust with a short position of Payden Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Payden Government.
Diversification Opportunities for First Trust and Payden Government
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Payden is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Specialty and Payden Government Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Government and First Trust 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 First Trust Specialty are associated (or correlated) with Payden Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Government has no effect on the direction of First Trust i.e., First Trust and Payden Government go up and down completely randomly.
Pair Corralation between First Trust and Payden Government
Considering the 90-day investment horizon First Trust Specialty is expected to generate 6.49 times more return on investment than Payden Government. However, First Trust is 6.49 times more volatile than Payden Government Fund. It trades about 0.13 of its potential returns per unit of risk. Payden Government Fund is currently generating about 0.08 per unit of risk. If you would invest 430.00 in First Trust Specialty on November 3, 2024 and sell it today you would earn a total of 11.00 from holding First Trust Specialty or generate 2.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
First Trust Specialty vs. Payden Government Fund
Performance |
| Timeline |
| First Trust Specialty |
| Payden Government |
First Trust and Payden Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Payden Government
The main advantage of trading using opposite First Trust and Payden Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Payden Government 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 Government will offset losses from the drop in Payden Government's long position.| First Trust vs. MFS High Income | First Trust vs. MFS High Yield | First Trust vs. Blackrock Muniholdings Quality | First Trust vs. MFS Government Markets |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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