Correlation Between Payden Core and Payden Equity
Can any of the company-specific risk be diversified away by investing in both Payden Core and Payden Equity 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 Equity 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 Equity Income, you can compare the effects of market volatilities on Payden Core and Payden Equity 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 Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Payden Core and Payden Equity.
Diversification Opportunities for Payden Core and Payden Equity
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Payden and Payden is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Payden E Bond and Payden Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Equity Income 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 Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Equity Income has no effect on the direction of Payden Core i.e., Payden Core and Payden Equity go up and down completely randomly.
Pair Corralation between Payden Core and Payden Equity
Assuming the 90 days horizon Payden Core is expected to generate 6.83 times less return on investment than Payden Equity. But when comparing it to its historical volatility, Payden E Bond is 2.58 times less risky than Payden Equity. It trades about 0.07 of its potential returns per unit of risk. Payden Equity Income is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 1,622 in Payden Equity Income on October 23, 2024 and sell it today you would earn a total of 37.00 from holding Payden Equity Income or generate 2.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Payden E Bond vs. Payden Equity Income
Performance |
| Timeline |
| Payden E Bond |
| Payden Equity Income |
Payden Core and Payden Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Payden Core and Payden Equity
The main advantage of trading using opposite Payden Core and Payden Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Payden Core position performs unexpectedly, Payden Equity 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 Equity will offset losses from the drop in Payden Equity's long position.| Payden Core vs. Alger Health Sciences | Payden Core vs. Allianzgi Health Sciences | Payden Core vs. Baillie Gifford Health | Payden Core vs. Delaware Healthcare Fund |
| Payden Equity vs. Janus Henderson Global | Payden Equity vs. Eaton Vance Income | Payden Equity vs. William Blair International | Payden Equity vs. Western Asset E |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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