Correlation Between Small Cap and Payden California
Can any of the company-specific risk be diversified away by investing in both Small Cap and Payden California 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 Small Cap and Payden California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Stock and Payden California Municipal, you can compare the effects of market volatilities on Small Cap and Payden California 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 Small Cap with a short position of Payden California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Payden California.
Diversification Opportunities for Small Cap and Payden California
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Small and Payden is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Payden California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden California and Small Cap 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 Small Cap Stock are associated (or correlated) with Payden California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden California has no effect on the direction of Small Cap i.e., Small Cap and Payden California go up and down completely randomly.
Pair Corralation between Small Cap and Payden California
Assuming the 90 days horizon Small Cap Stock is expected to generate 7.01 times more return on investment than Payden California. However, Small Cap is 7.01 times more volatile than Payden California Municipal. It trades about 0.04 of its potential returns per unit of risk. Payden California Municipal is currently generating about 0.1 per unit of risk. If you would invest 1,246 in Small Cap Stock on September 3, 2024 and sell it today you would earn a total of 283.00 from holding Small Cap Stock or generate 22.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 50.91% |
| Values | Daily Returns |
Small Cap Stock vs. Payden California Municipal
Performance |
| Timeline |
| Small Cap Stock |
| Payden California |
Small Cap and Payden California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Payden California
The main advantage of trading using opposite Small Cap and Payden California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Payden California 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 California will offset losses from the drop in Payden California's long position.| Small Cap vs. Vanguard Small Cap Index | Small Cap vs. Vanguard Small Cap Index | Small Cap vs. Vanguard Small Cap Index | Small Cap vs. Vanguard Small Cap Index |
| Payden California vs. Tiaa Cref Smallmid Cap Equity | Payden California vs. Wasatch Small Cap | Payden California vs. Small Cap Stock | Payden California vs. The Gabelli Small |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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