Correlation Between Payden Government and Midcap Fund

Can any of the company-specific risk be diversified away by investing in both Payden Government and Midcap Fund 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 Midcap Fund 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 Midcap Fund Class, you can compare the effects of market volatilities on Payden Government and Midcap Fund 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 Midcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Payden Government and Midcap Fund.

Diversification Opportunities for Payden Government and Midcap Fund

-0.58

Correlation Coefficient

Payden Government  Midcap Fund

Excellent diversification

The 3 months correlation between Payden and Midcap is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Payden Government Fund and Midcap Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Fund Class 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 Midcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Fund Class has no effect on the direction of Payden Government i.e., Payden Government and Midcap Fund go up and down completely randomly.

Pair Corralation between Payden Government and Midcap Fund

Assuming the 90 days horizon Payden Government Fund is expected to under-perform the Midcap Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Payden Government Fund is 6.43 times less risky than Midcap Fund. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Midcap Fund Class is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,301  in Midcap Fund Class on September 15, 2024 and sell it today you would earn a total of  185.00  from holding Midcap Fund Class or generate 4.3% return on investment over 90 days.

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

Payden Government Fund  vs.  Midcap Fund Class

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.

Midcap Fund Class

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Midcap Fund Class are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Midcap Fund 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 Midcap Fund

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

The idea behind Payden Government Fund and Midcap Fund Class 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.