Correlation Between Old Westbury and Payden Floating

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

By analyzing existing cross correlation between Old Westbury Large and Payden Floating Rate, you can compare the effects of market volatilities on Old Westbury and Payden Floating 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 Old Westbury with a short position of Payden Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Westbury and Payden Floating.

Diversification Opportunities for Old Westbury and Payden Floating

0.27

Correlation Coefficient

Old Westbury  Payden Floating

Modest diversification

The 3 months correlation between Old and Payden is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Old Westbury Large and Payden Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Floating Rate and Old Westbury 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 Old Westbury Large are associated (or correlated) with Payden Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Floating Rate has no effect on the direction of Old Westbury i.e., Old Westbury and Payden Floating go up and down completely randomly.

Pair Corralation between Old Westbury and Payden Floating

Assuming the 90 days horizon Old Westbury Large is expected to under-perform the Payden Floating. In addition to that, Old Westbury is 12.98 times more volatile than Payden Floating Rate. It trades about -0.04 of its total potential returns per unit of risk. Payden Floating Rate is currently generating about 0.18 per unit of volatility. If you would invest  964.00  in Payden Floating Rate on December 21, 2024 and sell it today you would earn a total of  7.00  from holding Payden Floating Rate or generate 0.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Old Westbury Large  vs.  Payden Floating Rate

Old Westbury Large

Risk-Adjusted Performance

Very Weak

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

Payden Floating Rate

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Payden Floating Rate are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Payden Floating is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Old Westbury and Payden Floating

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

The idea behind Old Westbury Large and Payden Floating Rate 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.