Correlation Between Payden High and Columbia

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

By analyzing existing cross correlation between Payden High Income and Columbia Treasury Index, you can compare the effects of market volatilities on Payden High and Columbia 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 High with a short position of Columbia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Payden High and Columbia.

Diversification Opportunities for Payden High and Columbia

0.19

Correlation Coefficient

Payden High  Columbia

Average diversification

The 3 months correlation between Payden and Columbia is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Payden High Income and Columbia Treasury Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Treasury Index and Payden High 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 High Income are associated (or correlated) with Columbia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Treasury Index has no effect on the direction of Payden High i.e., Payden High and Columbia go up and down completely randomly.

Pair Corralation between Payden High and Columbia

Assuming the 90 days horizon Payden High Income is expected to generate 0.48 times more return on investment than Columbia. However, Payden High Income is 2.08 times less risky than Columbia. It trades about 0.22 of its potential returns per unit of risk. Columbia Treasury Index is currently generating about 0.01 per unit of risk. If you would invest  567.00  in Payden High Income on October 21, 2024 and sell it today you would earn a total of  70.00  from holding Payden High Income or generate 12.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	57.26%
Values	Daily Returns

Payden High Income  vs.  Columbia Treasury Index

Payden High Income

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Payden High Income are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Payden High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Columbia Treasury Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Treasury Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Columbia 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 High and Columbia

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

The idea behind Payden High Income and Columbia Treasury Index 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.