Correlation Between Payden Floating and Absolute Convertible
Can any of the company-specific risk be diversified away by investing in both Payden Floating and Absolute Convertible 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 Absolute Convertible 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 Absolute Convertible Arbitrage, you can compare the effects of market volatilities on Payden Floating and Absolute Convertible 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 Absolute Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Payden Floating and Absolute Convertible.
Diversification Opportunities for Payden Floating and Absolute Convertible
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Payden and Absolute is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Payden Floating Rate and Absolute Convertible Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Convertible 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 Absolute Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Convertible has no effect on the direction of Payden Floating i.e., Payden Floating and Absolute Convertible go up and down completely randomly.
Pair Corralation between Payden Floating and Absolute Convertible
Assuming the 90 days horizon Payden Floating Rate is expected to generate 1.08 times more return on investment than Absolute Convertible. However, Payden Floating is 1.08 times more volatile than Absolute Convertible Arbitrage. It trades about 0.41 of its potential returns per unit of risk. Absolute Convertible Arbitrage is currently generating about 0.24 per unit of risk. If you would invest 809.00 in Payden Floating Rate on September 26, 2024 and sell it today you would earn a total of 173.00 from holding Payden Floating Rate or generate 21.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Payden Floating Rate vs. Absolute Convertible Arbitrage
Performance |
| Timeline |
| Payden Floating Rate |
| Absolute Convertible |
Payden Floating and Absolute Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Payden Floating and Absolute Convertible
The main advantage of trading using opposite Payden Floating and Absolute Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Payden Floating position performs unexpectedly, Absolute Convertible 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 Absolute Convertible will offset losses from the drop in Absolute Convertible'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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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