Correlation Between Payden Equity and Northern Large
Can any of the company-specific risk be diversified away by investing in both Payden Equity and Northern Large 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 Equity and Northern Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Payden Equity Income and Northern Large Cap, you can compare the effects of market volatilities on Payden Equity and Northern Large 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 Equity with a short position of Northern Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Payden Equity and Northern Large.
Diversification Opportunities for Payden Equity and Northern Large
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Payden and NORTHERN is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Payden Equity Income and Northern Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Large Cap and Payden Equity 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 Equity Income are associated (or correlated) with Northern Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Large Cap has no effect on the direction of Payden Equity i.e., Payden Equity and Northern Large go up and down completely randomly.
Pair Corralation between Payden Equity and Northern Large
Assuming the 90 days horizon Payden Equity is expected to generate 2.36 times less return on investment than Northern Large. But when comparing it to its historical volatility, Payden Equity Income is 1.2 times less risky than Northern Large. It trades about 0.06 of its potential returns per unit of risk. Northern Large Cap is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,023 in Northern Large Cap on August 29, 2024 and sell it today you would earn a total of 1,118 from holding Northern Large Cap or generate 55.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Payden Equity Income vs. Northern Large Cap
Performance |
| Timeline |
| Payden Equity Income |
| Northern Large Cap |
Payden Equity and Northern Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Payden Equity and Northern Large
The main advantage of trading using opposite Payden Equity and Northern Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Payden Equity position performs unexpectedly, Northern Large 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 Northern Large will offset losses from the drop in Northern Large's long position.| Payden Equity vs. Payden Equity Income | Payden Equity vs. Select Fund R | Payden Equity vs. Select Fund C | Payden Equity vs. Sentinel Mon Stock |
| Northern Large vs. Northern Stock Index | Northern Large vs. Northern Mid Cap | Northern Large vs. Northern Income Equity | Northern Large vs. Northern International Equity |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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