Correlation Between Payden High and Fidelity Tax

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

Diversification Opportunities for Payden High and Fidelity Tax

0.41

Correlation Coefficient

Payden High  Fidelity Tax

Very weak diversification

The 3 months correlation between Payden and Fidelity is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Payden High Income and Fidelity Tax Free Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Tax Free 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 Fidelity Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Tax Free has no effect on the direction of Payden High i.e., Payden High and Fidelity Tax go up and down completely randomly.

Pair Corralation between Payden High and Fidelity Tax

Assuming the 90 days horizon Payden High Income is expected to generate 0.74 times more return on investment than Fidelity Tax. However, Payden High Income is 1.35 times less risky than Fidelity Tax. It trades about 0.23 of its potential returns per unit of risk. Fidelity Tax Free Bond is currently generating about 0.07 per unit of risk. If you would invest  574.00  in Payden High Income on September 12, 2024 and sell it today you would earn a total of  68.00  from holding Payden High Income or generate 11.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	73.3%
Values	Daily Returns

Payden High Income  vs.  Fidelity Tax Free Bond

Payden High Income

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Payden High Income are ranked lower than 7 (%) 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.

Fidelity Tax Free

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Tax Free Bond are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Fidelity Tax 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 Fidelity Tax

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

The idea behind Payden High Income and Fidelity Tax Free Bond 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.