Correlation Between GM and Payden Strategic
Can any of the company-specific risk be diversified away by investing in both GM and Payden Strategic 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 GM and Payden Strategic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Payden Strategic Income, you can compare the effects of market volatilities on GM and Payden Strategic 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 GM with a short position of Payden Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Payden Strategic.
Diversification Opportunities for GM and Payden Strategic
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Payden is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Payden Strategic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Strategic Income and GM 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 General Motors are associated (or correlated) with Payden Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Strategic Income has no effect on the direction of GM i.e., GM and Payden Strategic go up and down completely randomly.
Pair Corralation between GM and Payden Strategic
Allowing for the 90-day total investment horizon General Motors is expected to generate 10.2 times more return on investment than Payden Strategic. However, GM is 10.2 times more volatile than Payden Strategic Income. It trades about 0.13 of its potential returns per unit of risk. Payden Strategic Income is currently generating about 0.17 per unit of risk. If you would invest 2,879 in General Motors on September 1, 2024 and sell it today you would earn a total of 2,680 from holding General Motors or generate 93.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
General Motors vs. Payden Strategic Income
Performance |
| Timeline |
| General Motors |
| Payden Strategic Income |
GM and Payden Strategic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Payden Strategic
The main advantage of trading using opposite GM and Payden Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Payden Strategic 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 Strategic will offset losses from the drop in Payden Strategic's long position.The idea behind General Motors and Payden Strategic Income 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 Strategic vs. Blackrock Government Bond | Payden Strategic vs. Us Government Securities | Payden Strategic vs. Dunham Porategovernment Bond | Payden Strategic vs. Prudential Government Income |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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