Correlation Between Payden Absolute and Payden Emerging
Can any of the company-specific risk be diversified away by investing in both Payden Absolute and Payden Emerging 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 Absolute and Payden Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Payden Absolute Return and Payden Emerging Markets, you can compare the effects of market volatilities on Payden Absolute and Payden Emerging 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 Absolute with a short position of Payden Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Payden Absolute and Payden Emerging.
Diversification Opportunities for Payden Absolute and Payden Emerging
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Payden and Payden is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Payden Absolute Return and Payden Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Emerging Markets and Payden Absolute 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 Absolute Return are associated (or correlated) with Payden Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Emerging Markets has no effect on the direction of Payden Absolute i.e., Payden Absolute and Payden Emerging go up and down completely randomly.
Pair Corralation between Payden Absolute and Payden Emerging
Assuming the 90 days horizon Payden Absolute is expected to generate 2.93 times less return on investment than Payden Emerging. But when comparing it to its historical volatility, Payden Absolute Return is 1.75 times less risky than Payden Emerging. It trades about 0.26 of its potential returns per unit of risk. Payden Emerging Markets is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest 1,026 in Payden Emerging Markets on May 27, 2025 and sell it today you would earn a total of 59.00 from holding Payden Emerging Markets or generate 5.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Payden Absolute Return vs. Payden Emerging Markets
Performance |
| Timeline |
| Payden Absolute Return |
| Payden Emerging Markets |
Payden Absolute and Payden Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Payden Absolute and Payden Emerging
The main advantage of trading using opposite Payden Absolute and Payden Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Payden Absolute position performs unexpectedly, Payden Emerging 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 Emerging will offset losses from the drop in Payden Emerging's long position.| Payden Absolute vs. Doubleline Total Return | Payden Absolute vs. The Short Term Municipal | Payden Absolute vs. Dodge Global Bond | Payden Absolute vs. Versatile Bond Portfolio |
| Payden Emerging vs. Payden Corporate Bond | Payden Emerging vs. Payden Floating Rate | Payden Emerging vs. Payden Absolute Return | Payden Emerging vs. Payden Porate Bond |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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