Correlation Between Payden California and Payden Corporate

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

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

Diversification Opportunities for Payden California and Payden Corporate

0.93

Correlation Coefficient

Payden California  Payden Corporate

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 California Muncipal and Payden Porate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Porate Bond and Payden California 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 California Muncipal are associated (or correlated) with Payden Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Porate Bond has no effect on the direction of Payden California i.e., Payden California and Payden Corporate go up and down completely randomly.

Pair Corralation between Payden California and Payden Corporate

Assuming the 90 days horizon Payden California Muncipal is expected to under-perform the Payden Corporate. But the mutual fund apears to be less risky and, when comparing its historical volatility, Payden California Muncipal is 1.77 times less risky than Payden Corporate. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Payden Porate Bond is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  983.00  in Payden Porate Bond on December 2, 2024 and sell it today you would earn a total of  3.00  from holding Payden Porate Bond or generate 0.31% return on investment over 90 days.

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

Payden California Muncipal  vs.  Payden Porate Bond

Payden California

Risk-Adjusted Performance

Very Weak

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

Payden Porate Bond

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Payden Porate Bond are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Payden Corporate 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 California and Payden Corporate

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

The idea behind Payden California Muncipal and Payden Porate Bond 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.