Correlation Between Payden Absolute and Payden Limited
Can any of the company-specific risk be diversified away by investing in both Payden Absolute and Payden Limited 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 Limited 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 Limited Maturity, you can compare the effects of market volatilities on Payden Absolute and Payden Limited 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 Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Payden Absolute and Payden Limited.
Diversification Opportunities for Payden Absolute and Payden Limited
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Payden and Payden is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Payden Absolute Return and Payden Limited Maturity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Limited Maturity 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 Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Limited Maturity has no effect on the direction of Payden Absolute i.e., Payden Absolute and Payden Limited go up and down completely randomly.
Pair Corralation between Payden Absolute and Payden Limited
Assuming the 90 days horizon Payden Absolute Return is expected to generate 1.26 times more return on investment than Payden Limited. However, Payden Absolute is 1.26 times more volatile than Payden Limited Maturity. It trades about 0.21 of its potential returns per unit of risk. Payden Limited Maturity is currently generating about 0.24 per unit of risk. If you would invest 841.00 in Payden Absolute Return on August 29, 2024 and sell it today you would earn a total of 112.00 from holding Payden Absolute Return or generate 13.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Payden Absolute Return vs. Payden Limited Maturity
Performance |
| Timeline |
| Payden Absolute Return |
| Payden Limited Maturity |
Payden Absolute and Payden Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Payden Absolute and Payden Limited
The main advantage of trading using opposite Payden Absolute and Payden Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Payden Absolute position performs unexpectedly, Payden Limited 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 Limited will offset losses from the drop in Payden Limited's long position.| Payden Absolute vs. Transamerica Intermediate Muni | Payden Absolute vs. Morningstar Municipal Bond | Payden Absolute vs. Federated Government Ultrashort | Payden Absolute vs. Nuveen Minnesota Municipal |
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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