Correlation Between Harding Loevner and Payden High

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

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

Diversification Opportunities for Harding Loevner and Payden High

0.55

Correlation Coefficient

Harding Loevner  Payden High

Very weak diversification

The 3 months correlation between Harding and Payden is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Harding Loevner Global and Payden High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden High Income and Harding Loevner 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 Harding Loevner Global are associated (or correlated) with Payden High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden High Income has no effect on the direction of Harding Loevner i.e., Harding Loevner and Payden High go up and down completely randomly.

Pair Corralation between Harding Loevner and Payden High

Assuming the 90 days horizon Harding Loevner is expected to generate 2.94 times less return on investment than Payden High. In addition to that, Harding Loevner is 5.15 times more volatile than Payden High Income. It trades about 0.01 of its total potential returns per unit of risk. Payden High Income is currently generating about 0.14 per unit of volatility. If you would invest  622.00  in Payden High Income on December 20, 2024 and sell it today you would earn a total of  9.00  from holding Payden High Income or generate 1.45% return on investment over 90 days.

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

Harding Loevner Global  vs.  Payden High Income

Harding Loevner Global

Risk-Adjusted Performance

Very Weak

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

Payden High Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Payden High Income are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Payden High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Harding Loevner and Payden High

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

The idea behind Harding Loevner Global and Payden High 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..