Correlation Between Payden Absolute and Payden Limited

Can any of the company-specific risk be diversified away by investing in both Payden Absolute and Payden Limited 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 Payden Limited 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 Payden Limited Maturity, you can compare the effects of market volatilities on Payden Absolute and Payden Limited 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 Payden Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Payden Absolute and Payden Limited.

Diversification Opportunities for Payden Absolute and Payden Limited

0.93

Correlation Coefficient

Payden Absolute  Payden Limited

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 Absolute Return and Payden Limited Maturity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Limited Maturity 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 Payden Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Limited Maturity has no effect on the direction of Payden Absolute i.e., Payden Absolute and Payden Limited go up and down completely randomly.

Pair Corralation between Payden Absolute and Payden Limited

Assuming the 90 days horizon Payden Absolute is expected to generate 1.44 times less return on investment than Payden Limited. But when comparing it to its historical volatility, Payden Absolute Return is 1.21 times less risky than Payden Limited. It trades about 0.13 of its potential returns per unit of risk. Payden Limited Maturity is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  944.00  in Payden Limited Maturity on December 28, 2024 and sell it today you would earn a total of  10.00  from holding Payden Limited Maturity or generate 1.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Payden Absolute Return  vs.  Payden Limited Maturity

Payden Absolute Return

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Payden Absolute Return are ranked lower than 10 (%) 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.

Payden Limited Maturity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Payden Limited Maturity are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Payden Limited is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Payden Absolute and Payden Limited

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

The idea behind Payden Absolute Return and Payden Limited Maturity 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.