Correlation Between Northern Large and Payden Equity
Can any of the company-specific risk be diversified away by investing in both Northern Large and Payden Equity 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 Northern Large and Payden Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Large Cap and Payden Equity Income, you can compare the effects of market volatilities on Northern Large and Payden Equity 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 Northern Large with a short position of Payden Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Large and Payden Equity.
Diversification Opportunities for Northern Large and Payden Equity
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Northern and Payden is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Northern Large Cap and Payden Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Equity Income and Northern Large 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 Northern Large Cap are associated (or correlated) with Payden Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Equity Income has no effect on the direction of Northern Large i.e., Northern Large and Payden Equity go up and down completely randomly.
Pair Corralation between Northern Large and Payden Equity
Assuming the 90 days horizon Northern Large is expected to generate 1.1 times less return on investment than Payden Equity. In addition to that, Northern Large is 1.18 times more volatile than Payden Equity Income. It trades about 0.35 of its total potential returns per unit of risk. Payden Equity Income is currently generating about 0.46 per unit of volatility. If you would invest 1,882 in Payden Equity Income on September 1, 2024 and sell it today you would earn a total of 125.00 from holding Payden Equity Income or generate 6.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Large Cap vs. Payden Equity Income
Performance |
| Timeline |
| Northern Large Cap |
| Payden Equity Income |
Northern Large and Payden Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Large and Payden Equity
The main advantage of trading using opposite Northern Large and Payden Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Large position performs unexpectedly, Payden Equity 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 Equity will offset losses from the drop in Payden Equity's long position.| Northern Large vs. Northern Mid Cap | Northern Large vs. Northern Income Equity | Northern Large vs. Northern International Equity |
| Payden Equity vs. Payden Emerging Markets | Payden Equity vs. World Ex Core | Payden Equity vs. Payden Gnma Fund | Payden Equity vs. Northern Large Cap |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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