Correlation Between Payden Core and Payden California
Can any of the company-specific risk be diversified away by investing in both Payden Core and Payden California 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 Core and Payden California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Payden E Bond and Payden California Muncipal, you can compare the effects of market volatilities on Payden Core and Payden California 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 Core with a short position of Payden California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Payden Core and Payden California.
Diversification Opportunities for Payden Core and Payden California
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Payden and Payden is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Payden E Bond and Payden California Muncipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden California and Payden Core 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 E Bond are associated (or correlated) with Payden California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden California has no effect on the direction of Payden Core i.e., Payden Core and Payden California go up and down completely randomly.
Pair Corralation between Payden Core and Payden California
Assuming the 90 days horizon Payden E Bond is expected to under-perform the Payden California. In addition to that, Payden Core is 1.24 times more volatile than Payden California Muncipal. It trades about -0.25 of its total potential returns per unit of risk. Payden California Muncipal is currently generating about -0.06 per unit of volatility. If you would invest 998.00 in Payden California Muncipal on August 25, 2024 and sell it today you would lose (6.00) from holding Payden California Muncipal or give up 0.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Payden E Bond vs. Payden California Muncipal
Performance |
| Timeline |
| Payden E Bond |
| Payden California |
Payden Core and Payden California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Payden Core and Payden California
The main advantage of trading using opposite Payden Core and Payden California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Payden Core position performs unexpectedly, Payden California 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 California will offset losses from the drop in Payden California's long position.| Payden Core vs. Payden Porate Bond | Payden Core vs. Payden Absolute Return | Payden Core vs. Payden Absolute Return | Payden Core vs. Payden Emerging Markets |
| Payden California vs. Payden Porate Bond | Payden California vs. Payden Absolute Return | Payden California vs. Payden Absolute Return | Payden California vs. Payden Emerging Markets |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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