Correlation Between Payden Absolute and Payden Strategic
Can any of the company-specific risk be diversified away by investing in both Payden Absolute 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 Payden Absolute and Payden Strategic 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 Strategic Income, you can compare the effects of market volatilities on Payden Absolute 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 Payden Absolute with a short position of Payden Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Payden Absolute and Payden Strategic.
Diversification Opportunities for Payden Absolute and Payden Strategic
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Payden and Payden is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Payden Absolute Return 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 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 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 Payden Absolute i.e., Payden Absolute and Payden Strategic go up and down completely randomly.
Pair Corralation between Payden Absolute and Payden Strategic
Assuming the 90 days horizon Payden Absolute is expected to generate 1.3 times less return on investment than Payden Strategic. But when comparing it to its historical volatility, Payden Absolute Return is 2.15 times less risky than Payden Strategic. It trades about 0.29 of its potential returns per unit of risk. Payden Strategic Income is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 877.00 in Payden Strategic Income on September 1, 2024 and sell it today you would earn a total of 88.00 from holding Payden Strategic Income or generate 10.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
Payden Absolute Return vs. Payden Strategic Income
Performance |
| Timeline |
| Payden Absolute Return |
| Payden Strategic Income |
Payden Absolute and Payden Strategic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Payden Absolute and Payden Strategic
The main advantage of trading using opposite Payden Absolute and Payden Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Payden Absolute 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.| Payden Absolute vs. Payden Absolute Return | Payden Absolute vs. Payden Emerging Markets | Payden Absolute vs. The Payden Regal | Payden Absolute vs. Payden E Bond |
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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