Correlation Between Payden Porate and Payden Gnma
Can any of the company-specific risk be diversified away by investing in both Payden Porate and Payden Gnma 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 Payden Porate and Payden Gnma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Payden Porate Bond and Payden Gnma Fund, you can compare the effects of market volatilities on Payden Porate and Payden Gnma 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 Payden Porate with a short position of Payden Gnma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Payden Porate and Payden Gnma.
Diversification Opportunities for Payden Porate and Payden Gnma
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Payden and Payden is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Payden Porate Bond and Payden Gnma Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Gnma Fund and Payden Porate 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 Payden Porate Bond are associated (or correlated) with Payden Gnma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Gnma Fund has no effect on the direction of Payden Porate i.e., Payden Porate and Payden Gnma go up and down completely randomly.
Pair Corralation between Payden Porate and Payden Gnma
Assuming the 90 days horizon Payden Porate Bond is expected to generate 1.08 times more return on investment than Payden Gnma. However, Payden Porate is 1.08 times more volatile than Payden Gnma Fund. It trades about -0.03 of its potential returns per unit of risk. Payden Gnma Fund is currently generating about -0.09 per unit of risk. If you would invest 999.00 in Payden Porate Bond on September 7, 2024 and sell it today you would lose (6.00) from holding Payden Porate Bond or give up 0.6% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 98.44% |
Values | Daily Returns |
Payden Porate Bond vs. Payden Gnma Fund
Performance |
Timeline |
Payden Porate Bond |
Payden Gnma Fund |
Payden Porate and Payden Gnma Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Payden Porate and Payden Gnma
The main advantage of trading using opposite Payden Porate and Payden Gnma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Payden Porate position performs unexpectedly, Payden Gnma 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 Gnma will offset losses from the drop in Payden Gnma's long position.The idea behind Payden Porate Bond and Payden Gnma Fund 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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Check out your portfolio center.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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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