Correlation Between Americafirst Large and Payden Absolute
Can any of the company-specific risk be diversified away by investing in both Americafirst Large and Payden Absolute 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 Americafirst Large and Payden Absolute into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Americafirst Large Cap and Payden Absolute Return, you can compare the effects of market volatilities on Americafirst Large and Payden Absolute 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 Americafirst Large with a short position of Payden Absolute. Check out your portfolio center. Please also check ongoing floating volatility patterns of Americafirst Large and Payden Absolute.
Diversification Opportunities for Americafirst Large and Payden Absolute
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Americafirst and Payden is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Americafirst Large Cap and Payden Absolute Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Absolute Return and Americafirst Large 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 Americafirst Large Cap are associated (or correlated) with Payden Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Absolute Return has no effect on the direction of Americafirst Large i.e., Americafirst Large and Payden Absolute go up and down completely randomly.
Pair Corralation between Americafirst Large and Payden Absolute
Assuming the 90 days horizon Americafirst Large Cap is expected to generate 8.98 times more return on investment than Payden Absolute. However, Americafirst Large is 8.98 times more volatile than Payden Absolute Return. It trades about 0.06 of its potential returns per unit of risk. Payden Absolute Return is currently generating about 0.2 per unit of risk. If you would invest 1,350 in Americafirst Large Cap on September 3, 2024 and sell it today you would earn a total of 117.00 from holding Americafirst Large Cap or generate 8.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Americafirst Large Cap vs. Payden Absolute Return
Performance |
| Timeline |
| Americafirst Large Cap |
| Payden Absolute Return |
Americafirst Large and Payden Absolute Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Americafirst Large and Payden Absolute
The main advantage of trading using opposite Americafirst Large and Payden Absolute positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Americafirst Large position performs unexpectedly, Payden Absolute 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 Absolute will offset losses from the drop in Payden Absolute's long position.The idea behind Americafirst Large Cap and Payden Absolute Return pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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