Correlation Between Payden California and Payden Core
Can any of the company-specific risk be diversified away by investing in both Payden California and Payden Core 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 California and Payden Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Payden California Muncipal and Payden Core Bond, you can compare the effects of market volatilities on Payden California and Payden Core 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 California with a short position of Payden Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Payden California and Payden Core.
Diversification Opportunities for Payden California and Payden Core
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Payden and Payden is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Payden California Muncipal and Payden Core Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Core Bond and Payden California 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 California Muncipal are associated (or correlated) with Payden Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Core Bond has no effect on the direction of Payden California i.e., Payden California and Payden Core go up and down completely randomly.
Pair Corralation between Payden California and Payden Core
Assuming the 90 days horizon Payden California is expected to generate 1.28 times less return on investment than Payden Core. But when comparing it to its historical volatility, Payden California Muncipal is 1.9 times less risky than Payden Core. It trades about 0.05 of its potential returns per unit of risk. Payden Core Bond is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 891.00 in Payden Core Bond on August 25, 2024 and sell it today you would earn a total of 24.00 from holding Payden Core Bond or generate 2.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Payden California Muncipal vs. Payden Core Bond
Performance |
| Timeline |
| Payden California |
| Payden Core Bond |
Payden California and Payden Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Payden California and Payden Core
The main advantage of trading using opposite Payden California and Payden Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Payden California position performs unexpectedly, Payden Core 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 Core will offset losses from the drop in Payden Core's long position.| Payden California vs. Payden Porate Bond | Payden California vs. Payden Absolute Return | Payden California vs. Payden Absolute Return | Payden California vs. Payden Emerging Markets |
| Payden Core vs. Payden Porate Bond | Payden Core vs. Payden Absolute Return | Payden Core vs. Payden Absolute Return | Payden Core 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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