Correlation Between Balanced Fund and Payden Government

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

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

Diversification Opportunities for Balanced Fund and Payden Government

0.8

Correlation Coefficient

Balanced Fund  Payden Government

Very poor diversification

The 3 months correlation between Balanced and Payden is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Institutional and Payden Government Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Government and Balanced 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 Balanced Fund Institutional are associated (or correlated) with Payden Government. 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 Balanced Fund i.e., Balanced Fund and Payden Government go up and down completely randomly.

Pair Corralation between Balanced Fund and Payden Government

Assuming the 90 days horizon Balanced Fund Institutional is expected to generate 2.78 times more return on investment than Payden Government. However, Balanced Fund is 2.78 times more volatile than Payden Government Fund. It trades about 0.25 of its potential returns per unit of risk. Payden Government Fund is currently generating about 0.16 per unit of risk. If you would invest  1,301  in Balanced Fund Institutional on July 8, 2025 and sell it today you would earn a total of  85.00  from holding Balanced Fund Institutional or generate 6.53% return on investment over 90 days.

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

Balanced Fund Institutional  vs.  Payden Government Fund

Balanced Fund Instit

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Fund Institutional are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Balanced 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

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Payden Government Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Payden Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Balanced Fund and Payden Government

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

The idea behind Balanced Fund Institutional 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.