Correlation Between Princeton Premium and Payden Floating

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

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

Diversification Opportunities for Princeton Premium and Payden Floating

0.16

Correlation Coefficient

Princeton Premium  Payden Floating

Average diversification

The 3 months correlation between Princeton and Payden is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Princeton Premium 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 Princeton Premium 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 Princeton Premium 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 Princeton Premium i.e., Princeton Premium and Payden Floating go up and down completely randomly.

Pair Corralation between Princeton Premium and Payden Floating

Assuming the 90 days horizon Princeton Premium is expected to under-perform the Payden Floating. In addition to that, Princeton Premium is 4.94 times more volatile than Payden Floating Rate. It trades about -0.03 of its total potential returns per unit of risk. Payden Floating Rate is currently generating about 0.23 per unit of volatility. If you would invest  967.00  in Payden Floating Rate on September 29, 2024 and sell it today you would earn a total of  14.00  from holding Payden Floating Rate or generate 1.45% return on investment over 90 days.

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

Princeton Premium  vs.  Payden Floating Rate

Princeton Premium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Princeton Premium has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Princeton Premium 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

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Payden Floating Rate are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential 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 Princeton Premium and Payden Floating

The main advantage of trading using opposite Princeton Premium and Payden Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Princeton Premium 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 Princeton Premium 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.