Correlation Between American Century and Payden California

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

By analyzing existing cross correlation between American Century Etf and Payden California Muncipal, you can compare the effects of market volatilities on American Century 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 American Century with a short position of Payden California. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Payden California.

Diversification Opportunities for American Century and Payden California

0.39

Correlation Coefficient

American Century  Payden California

Weak diversification

The 3 months correlation between American and Payden is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding American Century Etf and Payden California Muncipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden California and American Century 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 American Century Etf 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 American Century i.e., American Century and Payden California go up and down completely randomly.

Pair Corralation between American Century and Payden California

Assuming the 90 days horizon American Century Etf is expected to under-perform the Payden California. In addition to that, American Century is 6.17 times more volatile than Payden California Muncipal. It trades about -0.23 of its total potential returns per unit of risk. Payden California Muncipal is currently generating about -0.46 per unit of volatility. If you would invest  1,002  in Payden California Muncipal on October 9, 2024 and sell it today you would lose (16.00) from holding Payden California Muncipal or give up 1.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

American Century Etf  vs.  Payden California Muncipal

American Century Etf

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Century Etf has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, American Century is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Payden California

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Payden California Muncipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Payden California is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Century and Payden California

The main advantage of trading using opposite American Century and Payden California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century 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.

The idea behind American Century Etf and Payden California Muncipal 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.