Correlation Between Small Cap and Payden High

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

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

Diversification Opportunities for Small Cap and Payden High

0.95

Correlation Coefficient

Small Cap  Payden High

Almost no diversification

The 3 months correlation between Small and Payden is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Profund Small Cap and Payden High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden High Income and Small Cap 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 Small Cap Profund Small Cap are associated (or correlated) with Payden High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden High Income has no effect on the direction of Small Cap i.e., Small Cap and Payden High go up and down completely randomly.

Pair Corralation between Small Cap and Payden High

Assuming the 90 days horizon Small Cap Profund Small Cap is expected to generate 7.01 times more return on investment than Payden High. However, Small Cap is 7.01 times more volatile than Payden High Income. It trades about 0.17 of its potential returns per unit of risk. Payden High Income is currently generating about 0.42 per unit of risk. If you would invest  9,960  in Small Cap Profund Small Cap on May 1, 2025 and sell it today you would earn a total of  1,262  from holding Small Cap Profund Small Cap or generate 12.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Small Cap Profund Small Cap  vs.  Payden High Income

Small Cap Profund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Profund Small Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Small Cap may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Payden High Income

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Payden High Income are ranked lower than 33 (%) 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.

Pair Trading with Small Cap and Payden High

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

The idea behind Small Cap Profund Small Cap and Payden High Income 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.