Correlation Between Payden Government and Columbia Floating

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

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

Diversification Opportunities for Payden Government and Columbia Floating

-0.72

Correlation Coefficient

Payden Government  Columbia Floating

Pay attention - limited upside

The 3 months correlation between Payden and Columbia is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Payden Government Fund and Columbia Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Floating Rate and Payden Government 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 Government Fund are associated (or correlated) with Columbia Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Floating Rate has no effect on the direction of Payden Government i.e., Payden Government and Columbia Floating go up and down completely randomly.

Pair Corralation between Payden Government and Columbia Floating

Assuming the 90 days horizon Payden Government is expected to generate 2.78 times less return on investment than Columbia Floating. In addition to that, Payden Government is 1.11 times more volatile than Columbia Floating Rate. It trades about 0.07 of its total potential returns per unit of risk. Columbia Floating Rate is currently generating about 0.22 per unit of volatility. If you would invest  2,776  in Columbia Floating Rate on September 18, 2024 and sell it today you would earn a total of  585.00  from holding Columbia Floating Rate or generate 21.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.37%
Values	Daily Returns

Payden Government Fund  vs.  Columbia Floating Rate

Payden Government

Risk-Adjusted Performance

0 of 100

Very Weak

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

Columbia Floating Rate

Risk-Adjusted Performance

0 of 100

Solid

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

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

The idea behind Payden Government Fund and Columbia Floating Rate 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.