Correlation Between Payden Floating and Payden Corporate
Can any of the company-specific risk be diversified away by investing in both Payden Floating and Payden Corporate 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 Corporate 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 Porate Bond, you can compare the effects of market volatilities on Payden Floating and Payden Corporate 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 Corporate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Payden Floating and Payden Corporate.
Diversification Opportunities for Payden Floating and Payden Corporate
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Payden and Payden is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Payden Floating Rate and Payden Porate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Porate Bond 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 Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Porate Bond has no effect on the direction of Payden Floating i.e., Payden Floating and Payden Corporate go up and down completely randomly.
Pair Corralation between Payden Floating and Payden Corporate
Assuming the 90 days horizon Payden Floating is expected to generate 2.51 times less return on investment than Payden Corporate. But when comparing it to its historical volatility, Payden Floating Rate is 2.7 times less risky than Payden Corporate. It trades about 0.12 of its potential returns per unit of risk. Payden Porate Bond is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 979.00 in Payden Porate Bond on September 1, 2024 and sell it today you would earn a total of 10.00 from holding Payden Porate Bond or generate 1.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Payden Floating Rate vs. Payden Porate Bond
Performance |
| Timeline |
| Payden Floating Rate |
| Payden Porate Bond |
Payden Floating and Payden Corporate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Payden Floating and Payden Corporate
The main advantage of trading using opposite Payden Floating and Payden Corporate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Payden Floating position performs unexpectedly, Payden Corporate 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 Corporate will offset losses from the drop in Payden Corporate's long position.| Payden Floating vs. Payden Porate Bond | Payden Floating vs. Payden Absolute Return | Payden Floating vs. Payden Absolute Return | Payden Floating 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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