Correlation Between Vanguard Short-term and Payden Global

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

By analyzing existing cross correlation between Vanguard Short Term Investment Grade and Payden Global Low, you can compare the effects of market volatilities on Vanguard Short-term and Payden Global 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 Vanguard Short-term with a short position of Payden Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Short-term and Payden Global.

Diversification Opportunities for Vanguard Short-term and Payden Global

0.81

Correlation Coefficient

Vanguard Short-term  Payden Global

Very poor diversification

The 3 months correlation between Vanguard and Payden is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Short Term Investment and Payden Global Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Global Low and Vanguard Short-term 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 Vanguard Short Term Investment Grade are associated (or correlated) with Payden Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Global Low has no effect on the direction of Vanguard Short-term i.e., Vanguard Short-term and Payden Global go up and down completely randomly.

Pair Corralation between Vanguard Short-term and Payden Global

Assuming the 90 days horizon Vanguard Short-term is expected to generate 1.31 times less return on investment than Payden Global. In addition to that, Vanguard Short-term is 1.78 times more volatile than Payden Global Low. It trades about 0.04 of its total potential returns per unit of risk. Payden Global Low is currently generating about 0.09 per unit of volatility. If you would invest  962.00  in Payden Global Low on October 21, 2024 and sell it today you would earn a total of  5.00  from holding Payden Global Low or generate 0.52% return on investment over 90 days.

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

Vanguard Short Term Investment  vs.  Payden Global Low

Vanguard Short Term

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Short Term Investment Grade are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Vanguard Short-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Payden Global Low

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Vanguard Short-term and Payden Global

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

The idea behind Vanguard Short Term Investment Grade and Payden Global Low 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.