Correlation Between Payden Absolute and Payden Corporate
Can any of the company-specific risk be diversified away by investing in both Payden Absolute and Payden Corporate 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 Payden Absolute and Payden Corporate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Payden Absolute Return and Payden Corporate Bond, you can compare the effects of market volatilities on Payden Absolute and Payden Corporate 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 Payden Absolute with a short position of Payden Corporate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Payden Absolute and Payden Corporate.
Diversification Opportunities for Payden Absolute and Payden Corporate
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Payden and Payden is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Payden Absolute Return and Payden Corporate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Corporate Bond and Payden Absolute 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 Payden Absolute Return are associated (or correlated) with Payden Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Corporate Bond has no effect on the direction of Payden Absolute i.e., Payden Absolute and Payden Corporate go up and down completely randomly.
Pair Corralation between Payden Absolute and Payden Corporate
Assuming the 90 days horizon Payden Absolute is expected to generate 1.38 times less return on investment than Payden Corporate. But when comparing it to its historical volatility, Payden Absolute Return is 3.55 times less risky than Payden Corporate. It trades about 0.21 of its potential returns per unit of risk. Payden Corporate Bond is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 942.00 in Payden Corporate Bond on September 1, 2024 and sell it today you would earn a total of 51.00 from holding Payden Corporate Bond or generate 5.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Payden Absolute Return vs. Payden Corporate Bond
Performance |
| Timeline |
| Payden Absolute Return |
| Payden Corporate Bond |
Payden Absolute and Payden Corporate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Payden Absolute and Payden Corporate
The main advantage of trading using opposite Payden Absolute and Payden Corporate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Payden Absolute position performs unexpectedly, Payden Corporate 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 Corporate will offset losses from the drop in Payden Corporate's long position.| Payden Absolute vs. Vanguard Total Stock | Payden Absolute vs. Vanguard 500 Index | Payden Absolute vs. Vanguard Total Stock | Payden Absolute vs. Vanguard Total Stock |
| Payden Corporate vs. Vanguard Total Stock | Payden Corporate vs. Vanguard 500 Index | Payden Corporate vs. Vanguard Total Stock | Payden Corporate vs. Vanguard Total Stock |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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