Correlation Between Payden Core and Payden Absolute

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

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

Diversification Opportunities for Payden Core and Payden Absolute

0.93

Correlation Coefficient

Payden Core  Payden Absolute

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

Pair Corralation between Payden Core and Payden Absolute

Assuming the 90 days horizon Payden Core Bond is expected to generate 2.45 times more return on investment than Payden Absolute. However, Payden Core is 2.45 times more volatile than Payden Absolute Return. It trades about 0.12 of its potential returns per unit of risk. Payden Absolute Return is currently generating about 0.09 per unit of risk. If you would invest  902.00  in Payden Core Bond on December 29, 2024 and sell it today you would earn a total of  17.00  from holding Payden Core Bond or generate 1.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Payden Core Bond  vs.  Payden Absolute Return

Payden Core Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Payden Core Bond are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Payden Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Payden Absolute Return

Risk-Adjusted Performance

Good

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

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

The idea behind Payden Core Bond and Payden Absolute Return 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.