Correlation Between Alpine Ultra and Payden Emerging

Can any of the company-specific risk be diversified away by investing in both Alpine Ultra and Payden Emerging 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 Alpine Ultra and Payden Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alpine Ultra Short and Payden Emerging Markets, you can compare the effects of market volatilities on Alpine Ultra and Payden Emerging 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 Alpine Ultra with a short position of Payden Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpine Ultra and Payden Emerging.

Diversification Opportunities for Alpine Ultra and Payden Emerging

0.12

Correlation Coefficient

Alpine Ultra  Payden Emerging

Average diversification

The 3 months correlation between Alpine and Payden is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Alpine Ultra Short and Payden Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Emerging Markets and Alpine Ultra 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 Alpine Ultra Short are associated (or correlated) with Payden Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Emerging Markets has no effect on the direction of Alpine Ultra i.e., Alpine Ultra and Payden Emerging go up and down completely randomly.

Pair Corralation between Alpine Ultra and Payden Emerging

Assuming the 90 days horizon Alpine Ultra is expected to generate 1.82 times less return on investment than Payden Emerging. But when comparing it to its historical volatility, Alpine Ultra Short is 1.87 times less risky than Payden Emerging. It trades about 0.24 of its potential returns per unit of risk. Payden Emerging Markets is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  871.00  in Payden Emerging Markets on October 24, 2024 and sell it today you would earn a total of  5.00  from holding Payden Emerging Markets or generate 0.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Alpine Ultra Short  vs.  Payden Emerging Markets

Alpine Ultra Short

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alpine Ultra Short are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Alpine Ultra is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Payden Emerging Markets

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Payden Emerging Markets are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Payden Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alpine Ultra and Payden Emerging

The main advantage of trading using opposite Alpine Ultra and Payden Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpine Ultra position performs unexpectedly, Payden Emerging 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 Emerging will offset losses from the drop in Payden Emerging's long position.

The idea behind Alpine Ultra Short and Payden Emerging Markets 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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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.