Correlation Between Payden Emerging and Payden Low

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

By analyzing existing cross correlation between Payden Emerging Markets and Payden Low Duration, you can compare the effects of market volatilities on Payden Emerging and Payden Low 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 Emerging with a short position of Payden Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of Payden Emerging and Payden Low.

Diversification Opportunities for Payden Emerging and Payden Low

0.14

Correlation Coefficient

Payden Emerging  Payden Low

Average diversification

The 3 months correlation between Payden and Payden is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Payden Emerging Markets and Payden Low Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Low Duration and Payden Emerging 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 Emerging Markets are associated (or correlated) with Payden Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Low Duration has no effect on the direction of Payden Emerging i.e., Payden Emerging and Payden Low go up and down completely randomly.

Pair Corralation between Payden Emerging and Payden Low

Assuming the 90 days horizon Payden Emerging Markets is expected to generate 1.33 times more return on investment than Payden Low. However, Payden Emerging is 1.33 times more volatile than Payden Low Duration. It trades about 0.11 of its potential returns per unit of risk. Payden Low Duration is currently generating about -0.01 per unit of risk. If you would invest  876.00  in Payden Emerging Markets on September 13, 2024 and sell it today you would earn a total of  9.00  from holding Payden Emerging Markets or generate 1.03% return on investment over 90 days.

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

Payden Emerging Markets  vs.  Payden Low Duration

Payden Emerging Markets

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Payden Emerging Markets are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Payden Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Payden Low Duration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Payden Low Duration has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Payden Low 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 Emerging and Payden Low

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

The idea behind Payden Emerging Markets and Payden Low Duration 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.