Correlation Between Macquariefirst and Payden Government

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

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

Diversification Opportunities for Macquariefirst and Payden Government

0.81

Correlation Coefficient

Macquariefirst  Payden Government

Very poor diversification

The 3 months correlation between Macquariefirst and Payden is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Macquariefirst Tr Global and Payden Government Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Government and Macquariefirst 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 Macquariefirst Tr Global 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 Macquariefirst i.e., Macquariefirst and Payden Government go up and down completely randomly.

Pair Corralation between Macquariefirst and Payden Government

Considering the 90-day investment horizon Macquariefirst Tr Global is expected to generate 5.52 times more return on investment than Payden Government. However, Macquariefirst is 5.52 times more volatile than Payden Government Fund. It trades about 0.15 of its potential returns per unit of risk. Payden Government Fund is currently generating about 0.08 per unit of risk. If you would invest  730.00  in Macquariefirst Tr Global on February 18, 2024 and sell it today you would earn a total of  63.00  from holding Macquariefirst Tr Global or generate 8.63% return on investment over 90 days.

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

Macquariefirst Tr Global  vs.  Payden Government Fund

Macquariefirst Tr Global

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Macquariefirst Tr Global are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather weak technical and fundamental indicators, Macquariefirst may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Payden Government

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Payden Government Fund are ranked lower than 5 (%) 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 Macquariefirst and Payden Government

The main advantage of trading using opposite Macquariefirst and Payden Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macquariefirst 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 Macquariefirst Tr Global 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.