Correlation Between Payden Global and Versatile Bond

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

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

Diversification Opportunities for Payden Global and Versatile Bond

0.67

Correlation Coefficient

Payden Global  Versatile Bond

Poor diversification

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

Pair Corralation between Payden Global and Versatile Bond

Assuming the 90 days horizon Payden Global Fixed is expected to under-perform the Versatile Bond. In addition to that, Payden Global is 2.3 times more volatile than Versatile Bond Portfolio. It trades about -0.02 of its total potential returns per unit of risk. Versatile Bond Portfolio is currently generating about -0.04 per unit of volatility. If you would invest  6,392  in Versatile Bond Portfolio on September 22, 2024 and sell it today you would lose (5.00) from holding Versatile Bond Portfolio or give up 0.08% of portfolio value over 90 days.

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

Payden Global Fixed  vs.  Versatile Bond Portfolio

Payden Global Fixed

Risk-Adjusted Performance

0 of 100

Very 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 technical and fundamental indicators, Payden Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Versatile Bond Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Versatile Bond Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Versatile Bond 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 Global and Versatile Bond

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

The idea behind Payden Global Fixed and Versatile Bond Portfolio 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.