Correlation Between Payden Core and Payden Strategic
Can any of the company-specific risk be diversified away by investing in both Payden Core and Payden Strategic 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 Strategic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Payden Core Bond and Payden Strategic Income, you can compare the effects of market volatilities on Payden Core and Payden Strategic 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 Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Payden Core and Payden Strategic.
Diversification Opportunities for Payden Core and Payden Strategic
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Payden and Payden is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Payden Core Bond and Payden Strategic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Strategic 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 Core Bond are associated (or correlated) with Payden Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Strategic Income has no effect on the direction of Payden Core i.e., Payden Core and Payden Strategic go up and down completely randomly.
Pair Corralation between Payden Core and Payden Strategic
Assuming the 90 days horizon Payden Core Bond is expected to generate 1.79 times more return on investment than Payden Strategic. However, Payden Core is 1.79 times more volatile than Payden Strategic Income. It trades about 0.07 of its potential returns per unit of risk. Payden Strategic Income is currently generating about 0.12 per unit of risk. If you would invest 919.00 in Payden Core Bond on August 29, 2024 and sell it today you would earn a total of 5.00 from holding Payden Core Bond or generate 0.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Payden Core Bond vs. Payden Strategic Income
Performance |
| Timeline |
| Payden Core Bond |
| Payden Strategic Income |
Payden Core and Payden Strategic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Payden Core and Payden Strategic
The main advantage of trading using opposite Payden Core and Payden Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Payden Core position performs unexpectedly, Payden Strategic 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 Strategic will offset losses from the drop in Payden Strategic's long position.| Payden Core vs. Blrc Sgy Mnp | Payden Core vs. Vanguard Emerging Markets | Payden Core vs. Federated Short Intermediate Duration | Payden Core vs. Multisector Bond Sma |
| Payden Strategic vs. Pace Large Value | Payden Strategic vs. Hartford Moderate Allocation | Payden Strategic vs. Qs Large Cap | Payden Strategic vs. Pace Large Growth |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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