Correlation Between Payden E and Payden Global

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

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

Diversification Opportunities for Payden E and Payden Global

0.67

Correlation Coefficient

Payden E  Payden Global

Poor diversification

The 3 months correlation between Payden and Payden is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Payden E Bond and Payden Global Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Global Fixed and Payden E 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 E Bond are associated (or correlated) with Payden Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Global Fixed has no effect on the direction of Payden E i.e., Payden E and Payden Global go up and down completely randomly.

Pair Corralation between Payden E and Payden Global

Assuming the 90 days horizon Payden E Bond is expected to under-perform the Payden Global. In addition to that, Payden E is 1.4 times more volatile than Payden Global Fixed. It trades about -0.14 of its total potential returns per unit of risk. Payden Global Fixed is currently generating about 0.01 per unit of volatility. If you would invest  768.00  in Payden Global Fixed on September 13, 2024 and sell it today you would earn a total of  1.00  from holding Payden Global Fixed or generate 0.13% return on investment over 90 days.

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

Payden E Bond  vs.  Payden Global Fixed

Payden E Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Payden Global Fixed

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Payden Global Fixed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Payden Global 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 E and Payden Global

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

The idea behind Payden E Bond and Payden Global Fixed 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.