Correlation Between Payden Floating and Payden Absolute
Can any of the company-specific risk be diversified away by investing in both Payden Floating and Payden Absolute 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 Floating and Payden Absolute into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Payden Floating Rate and Payden Absolute Return, you can compare the effects of market volatilities on Payden Floating and Payden Absolute 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 Floating with a short position of Payden Absolute. Check out your portfolio center. Please also check ongoing floating volatility patterns of Payden Floating and Payden Absolute.
Diversification Opportunities for Payden Floating and Payden Absolute
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Payden and Payden is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Payden Floating Rate and Payden Absolute Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Absolute Return and Payden Floating 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 Floating Rate are associated (or correlated) with Payden Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Absolute Return has no effect on the direction of Payden Floating i.e., Payden Floating and Payden Absolute go up and down completely randomly.
Pair Corralation between Payden Floating and Payden Absolute
Assuming the 90 days horizon Payden Floating Rate is expected to generate 0.91 times more return on investment than Payden Absolute. However, Payden Floating Rate is 1.1 times less risky than Payden Absolute. It trades about 0.34 of its potential returns per unit of risk. Payden Absolute Return is currently generating about 0.22 per unit of risk. If you would invest 924.00 in Payden Floating Rate on September 1, 2024 and sell it today you would earn a total of 53.00 from holding Payden Floating Rate or generate 5.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Payden Floating Rate vs. Payden Absolute Return
Performance |
| Timeline |
| Payden Floating Rate |
| Payden Absolute Return |
Payden Floating and Payden Absolute Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Payden Floating and Payden Absolute
The main advantage of trading using opposite Payden Floating and Payden Absolute positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Payden Floating position performs unexpectedly, Payden Absolute 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 Absolute will offset losses from the drop in Payden Absolute's long position.| Payden Floating vs. Vanguard Total Stock | Payden Floating vs. Vanguard 500 Index | Payden Floating vs. Vanguard Total Stock | Payden Floating vs. Vanguard Total Stock |
| Payden Absolute vs. Jhancock Disciplined Value | Payden Absolute vs. Americafirst Large Cap | Payden Absolute vs. Aqr Large Cap | Payden Absolute vs. Dunham 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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