Correlation Between Payden Government and American Funds
Can any of the company-specific risk be diversified away by investing in both Payden Government 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 Government 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 Government Fund and American Funds American, you can compare the effects of market volatilities on Payden Government 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 Government with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Payden Government and American Funds.
Diversification Opportunities for Payden Government and American Funds
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Payden and American is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Payden Government Fund and American Funds American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds American and Payden Government 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 Government Fund 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 American has no effect on the direction of Payden Government i.e., Payden Government and American Funds go up and down completely randomly.
Pair Corralation between Payden Government and American Funds
Assuming the 90 days horizon Payden Government is expected to generate 4.5 times less return on investment than American Funds. But when comparing it to its historical volatility, Payden Government Fund is 3.22 times less risky than American Funds. It trades about 0.09 of its potential returns per unit of risk. American Funds American is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 3,149 in American Funds American on September 14, 2024 and sell it today you would earn a total of 561.00 from holding American Funds American or generate 17.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Payden Government Fund vs. American Funds American
Performance |
| Timeline |
| Payden Government |
| American Funds American |
Payden Government and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Payden Government and American Funds
The main advantage of trading using opposite Payden Government and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Payden Government 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 Government vs. Vy Clarion Real | Payden Government vs. Amg Managers Centersquare | Payden Government vs. Short Real Estate | Payden Government vs. Virtus Real Estate |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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