Correlation Between World Ex and Payden Equity

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

By analyzing existing cross correlation between World Ex Core and Payden Equity Income, you can compare the effects of market volatilities on World Ex and Payden Equity 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 World Ex with a short position of Payden Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Ex and Payden Equity.

Diversification Opportunities for World Ex and Payden Equity

0.11

Correlation Coefficient

World Ex  Payden Equity

Average diversification

The 3 months correlation between World and Payden is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding World Ex Core and Payden Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Equity Income and World Ex 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 World Ex Core are associated (or correlated) with Payden Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Equity Income has no effect on the direction of World Ex i.e., World Ex and Payden Equity go up and down completely randomly.

Pair Corralation between World Ex and Payden Equity

Assuming the 90 days horizon World Ex Core is expected to generate 1.01 times more return on investment than Payden Equity. However, World Ex is 1.01 times more volatile than Payden Equity Income. It trades about 0.17 of its potential returns per unit of risk. Payden Equity Income is currently generating about 0.15 per unit of risk. If you would invest  1,301  in World Ex Core on December 2, 2024 and sell it today you would earn a total of  59.00  from holding World Ex Core or generate 4.53% return on investment over 90 days.

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

World Ex Core  vs.  Payden Equity Income

World Ex Core

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in World Ex Core are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, World Ex is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Payden Equity Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Payden Equity Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with World Ex and Payden Equity

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

The idea behind World Ex Core and Payden Equity Income 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.