Correlation Between Payden Absolute and Buffalo Growth

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

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

Diversification Opportunities for Payden Absolute and Buffalo Growth

0.86

Correlation Coefficient

Payden Absolute  Buffalo Growth

Very poor diversification

The 3 months correlation between Payden and Buffalo is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Payden Absolute Return and Buffalo Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buffalo Growth and Payden Absolute 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 Absolute Return are associated (or correlated) with Buffalo Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buffalo Growth has no effect on the direction of Payden Absolute i.e., Payden Absolute and Buffalo Growth go up and down completely randomly.

Pair Corralation between Payden Absolute and Buffalo Growth

Assuming the 90 days horizon Payden Absolute is expected to generate 18.73 times less return on investment than Buffalo Growth. But when comparing it to its historical volatility, Payden Absolute Return is 6.61 times less risky than Buffalo Growth. It trades about 0.06 of its potential returns per unit of risk. Buffalo Growth is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3,460  in Buffalo Growth on September 3, 2024 and sell it today you would earn a total of  357.00  from holding Buffalo Growth or generate 10.32% return on investment over 90 days.

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

Payden Absolute Return  vs.  Buffalo Growth

Payden Absolute Return

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Payden Absolute Return are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Payden Absolute is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Buffalo Growth

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Buffalo Growth are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Buffalo Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Payden Absolute and Buffalo Growth

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

The idea behind Payden Absolute Return and Buffalo Growth 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.