Correlation Between Payden Core and Payden Strategic

Can any of the company-specific risk be diversified away by investing in both Payden Core and Payden Strategic 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 Core and Payden Strategic 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 Strategic Income, you can compare the effects of market volatilities on Payden Core and Payden Strategic 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 Core with a short position of Payden Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Payden Core and Payden Strategic.

Diversification Opportunities for Payden Core and Payden Strategic

0.89

Correlation Coefficient

Payden Core  Payden Strategic

Very poor diversification

The 3 months correlation between Payden and Payden is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Payden E Bond and Payden Strategic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Strategic Income and Payden Core 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 Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Strategic Income has no effect on the direction of Payden Core i.e., Payden Core and Payden Strategic go up and down completely randomly.

Pair Corralation between Payden Core and Payden Strategic

Assuming the 90 days horizon Payden Core is expected to generate 1.21 times less return on investment than Payden Strategic. In addition to that, Payden Core is 1.7 times more volatile than Payden Strategic Income. It trades about 0.04 of its total potential returns per unit of risk. Payden Strategic Income is currently generating about 0.09 per unit of volatility. If you would invest  958.00  in Payden Strategic Income on December 2, 2024 and sell it today you would earn a total of  9.00  from holding Payden Strategic Income or generate 0.94% return on investment over 90 days.

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

Payden E Bond  vs.  Payden Strategic Income

Payden E Bond

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Payden E Bond are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Payden Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Payden Strategic Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Payden Strategic Income are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Payden Strategic 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 Core and Payden Strategic

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

The idea behind Payden E Bond and Payden Strategic Income 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.