Correlation Between American Funds and Payden Gnma
Can any of the company-specific risk be diversified away by investing in both American Funds and Payden Gnma 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 American Funds and Payden Gnma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Government and Payden Gnma Fund, you can compare the effects of market volatilities on American Funds and Payden Gnma 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 American Funds with a short position of Payden Gnma. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Payden Gnma.
Diversification Opportunities for American Funds and Payden Gnma
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Payden is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Government and Payden Gnma Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Gnma Fund and American Funds 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 American Funds Government are associated (or correlated) with Payden Gnma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Gnma Fund has no effect on the direction of American Funds i.e., American Funds and Payden Gnma go up and down completely randomly.
Pair Corralation between American Funds and Payden Gnma
Assuming the 90 days horizon American Funds is expected to generate 1.24 times less return on investment than Payden Gnma. But when comparing it to its historical volatility, American Funds Government is 1.06 times less risky than Payden Gnma. It trades about 0.07 of its potential returns per unit of risk. Payden Gnma Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 699.00 in Payden Gnma Fund on September 1, 2024 and sell it today you would earn a total of 64.00 from holding Payden Gnma Fund or generate 9.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.63% |
| Values | Daily Returns |
American Funds Government vs. Payden Gnma Fund
Performance |
| Timeline |
| American Funds Government |
| Payden Gnma Fund |
American Funds and Payden Gnma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Payden Gnma
The main advantage of trading using opposite American Funds and Payden Gnma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Payden Gnma 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 Gnma will offset losses from the drop in Payden Gnma's long position.| American Funds vs. Income Fund Of | American Funds vs. New World Fund | American Funds vs. American Mutual Fund | American Funds vs. American Mutual Fund |
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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