Correlation Between Payden Strategic and American Funds
Can any of the company-specific risk be diversified away by investing in both Payden Strategic and American Funds 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 Strategic and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Payden Strategic Income and American Funds Retirement, you can compare the effects of market volatilities on Payden Strategic and American Funds 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 Strategic with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Payden Strategic and American Funds.
Diversification Opportunities for Payden Strategic and American Funds
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Payden and American is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Payden Strategic Income and American Funds Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Retirement and Payden Strategic 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 Strategic Income are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Retirement has no effect on the direction of Payden Strategic i.e., Payden Strategic and American Funds go up and down completely randomly.
Pair Corralation between Payden Strategic and American Funds
Assuming the 90 days horizon Payden Strategic is expected to generate 1.98 times less return on investment than American Funds. But when comparing it to its historical volatility, Payden Strategic Income is 2.19 times less risky than American Funds. It trades about 0.13 of its potential returns per unit of risk. American Funds Retirement is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,143 in American Funds Retirement on November 3, 2024 and sell it today you would earn a total of 135.00 from holding American Funds Retirement or generate 11.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Payden Strategic Income vs. American Funds Retirement
Performance |
| Timeline |
| Payden Strategic Income |
| American Funds Retirement |
Payden Strategic and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Payden Strategic and American Funds
The main advantage of trading using opposite Payden Strategic and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Payden Strategic position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Payden Strategic vs. Voya Target Retirement | Payden Strategic vs. Franklin Lifesmart Retirement | Payden Strategic vs. Voya Retirement Servative | Payden Strategic vs. Franklin Lifesmart Retirement |
| American Funds vs. Putnam Retirement Advantage | American Funds vs. Dimensional Retirement Income | American Funds vs. Mainstay Moderate Etf | American Funds vs. Voya Retirement Servative |
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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