Correlation Between Vest Large and Payden Government

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

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

Diversification Opportunities for Vest Large and Payden Government

0.78

Correlation Coefficient

Vest Large  Payden Government

Poor diversification

The 3 months correlation between Vest and Payden is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Vest Large Cap and Payden Government Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Government and Vest Large 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 Vest Large Cap 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 Vest Large i.e., Vest Large and Payden Government go up and down completely randomly.

Pair Corralation between Vest Large and Payden Government

Assuming the 90 days horizon Vest Large Cap is expected to generate 1.89 times more return on investment than Payden Government. However, Vest Large is 1.89 times more volatile than Payden Government Fund. It trades about 0.28 of its potential returns per unit of risk. Payden Government Fund is currently generating about 0.05 per unit of risk. If you would invest  794.00  in Vest Large Cap on May 5, 2025 and sell it today you would earn a total of  54.00  from holding Vest Large Cap or generate 6.8% return on investment over 90 days.

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

Vest Large Cap  vs.  Payden Government Fund

Vest Large Cap

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vest Large Cap are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vest Large may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Payden Government

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Payden Government Fund are ranked lower than 4 (%) 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 Vest Large and Payden Government

The main advantage of trading using opposite Vest Large and Payden Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vest Large 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 Vest Large Cap 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.