Correlation Between Federated Government and Payden Absolute
Can any of the company-specific risk be diversified away by investing in both Federated Government 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 Federated Government and Payden Absolute into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Government Ultrashort and Payden Absolute Return, you can compare the effects of market volatilities on Federated Government 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 Federated Government with a short position of Payden Absolute. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Government and Payden Absolute.
Diversification Opportunities for Federated Government and Payden Absolute
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Federated and Payden is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Federated Government Ultrashor 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 Federated Government 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 Federated Government Ultrashort 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 Federated Government i.e., Federated Government and Payden Absolute go up and down completely randomly.
Pair Corralation between Federated Government and Payden Absolute
Assuming the 90 days horizon Federated Government Ultrashort is expected to generate 0.2 times more return on investment than Payden Absolute. However, Federated Government Ultrashort is 5.05 times less risky than Payden Absolute. It trades about 0.12 of its potential returns per unit of risk. Payden Absolute Return is currently generating about -0.13 per unit of risk. If you would invest 976.00 in Federated Government Ultrashort on September 1, 2024 and sell it today you would earn a total of 1.00 from holding Federated Government Ultrashort or generate 0.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Government Ultrashor vs. Payden Absolute Return
Performance |
| Timeline |
| Federated Government |
| Payden Absolute Return |
Federated Government and Payden Absolute Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Government and Payden Absolute
The main advantage of trading using opposite Federated Government and Payden Absolute positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Government 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.| Federated Government vs. Federated Emerging Market | Federated Government vs. Federated Mdt All | Federated Government vs. Federated Mdt Balanced | Federated Government vs. Federated Global Allocation |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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