Correlation Between Small Cap and Payden Global
Can any of the company-specific risk be diversified away by investing in both Small Cap and Payden Global 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 Small Cap and Payden Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Equity and Payden Global Fixed, you can compare the effects of market volatilities on Small Cap and Payden Global 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 Small Cap with a short position of Payden Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Payden Global.
Diversification Opportunities for Small Cap and Payden Global
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Small and Payden is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and Payden Global Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Global Fixed and Small Cap 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 Small Cap Equity are associated (or correlated) with Payden Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Global Fixed has no effect on the direction of Small Cap i.e., Small Cap and Payden Global go up and down completely randomly.
Pair Corralation between Small Cap and Payden Global
Assuming the 90 days horizon Small Cap Equity is expected to under-perform the Payden Global. In addition to that, Small Cap is 4.27 times more volatile than Payden Global Fixed. It trades about -0.27 of its total potential returns per unit of risk. Payden Global Fixed is currently generating about 0.17 per unit of volatility. If you would invest 760.00 in Payden Global Fixed on November 27, 2024 and sell it today you would earn a total of 6.00 from holding Payden Global Fixed or generate 0.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Equity vs. Payden Global Fixed
Performance |
| Timeline |
| Small Cap Equity |
| Payden Global Fixed |
Small Cap and Payden Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Payden Global
The main advantage of trading using opposite Small Cap and Payden Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Payden Global 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 Global will offset losses from the drop in Payden Global's long position.| Small Cap vs. Growth Allocation Fund | Small Cap vs. Defensive Market Strategies | Small Cap vs. Defensive Market Strategies | Small Cap vs. Value Equity Institutional |
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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