Correlation Between Amcap Fund and Payden Us

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

By analyzing existing cross correlation between Amcap Fund Class and Payden Government Fund, you can compare the effects of market volatilities on Amcap Fund and Payden Us 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 Amcap Fund with a short position of Payden Us. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amcap Fund and Payden Us.

Diversification Opportunities for Amcap Fund and Payden Us

-0.79

Correlation Coefficient

Amcap Fund  Payden Us

Pay attention - limited upside

The 3 months correlation between Amcap and Payden is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Amcap Fund Class and Payden Government Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Government and Amcap Fund 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 Amcap Fund Class are associated (or correlated) with Payden Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Government has no effect on the direction of Amcap Fund i.e., Amcap Fund and Payden Us go up and down completely randomly.

Pair Corralation between Amcap Fund and Payden Us

Assuming the 90 days horizon Amcap Fund Class is expected to generate 10.05 times more return on investment than Payden Us. However, Amcap Fund is 10.05 times more volatile than Payden Government Fund. It trades about 0.33 of its potential returns per unit of risk. Payden Government Fund is currently generating about -0.1 per unit of risk. If you would invest  3,090  in Amcap Fund Class on February 14, 2025 and sell it today you would earn a total of  344.00  from holding Amcap Fund Class or generate 11.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Amcap Fund Class  vs.  Payden Government Fund

Amcap Fund Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amcap Fund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Amcap Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Payden Government

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Payden Government Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Payden Us is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amcap Fund and Payden Us

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

The idea behind Amcap Fund Class and Payden Government Fund 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.