Correlation Between Small Cap and Baird Small/mid
Can any of the company-specific risk be diversified away by investing in both Small Cap and Baird Small/mid 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 Baird Small/mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value and Baird Smallmid Cap, you can compare the effects of market volatilities on Small Cap and Baird Small/mid 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 Baird Small/mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Baird Small/mid.
Diversification Opportunities for Small Cap and Baird Small/mid
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SMALL and Baird is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value and Baird Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Smallmid Cap 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 Value are associated (or correlated) with Baird Small/mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird Smallmid Cap has no effect on the direction of Small Cap i.e., Small Cap and Baird Small/mid go up and down completely randomly.
Pair Corralation between Small Cap and Baird Small/mid
Assuming the 90 days horizon Small Cap is expected to generate 1.12 times less return on investment than Baird Small/mid. In addition to that, Small Cap is 1.33 times more volatile than Baird Smallmid Cap. It trades about 0.18 of its total potential returns per unit of risk. Baird Smallmid Cap is currently generating about 0.26 per unit of volatility. If you would invest 1,602 in Baird Smallmid Cap on September 3, 2024 and sell it today you would earn a total of 197.00 from holding Baird Smallmid Cap or generate 12.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value vs. Baird Smallmid Cap
Performance |
| Timeline |
| Small Cap Value |
| Baird Smallmid Cap |
Small Cap and Baird Small/mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Baird Small/mid
The main advantage of trading using opposite Small Cap and Baird Small/mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Baird Small/mid 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 Baird Small/mid will offset losses from the drop in Baird Small/mid's long position.| Small Cap vs. Vanguard Small Cap Value | Small Cap vs. Vanguard Small Cap Value | Small Cap vs. Us Small Cap | Small Cap vs. Us Targeted Value |
| Baird Small/mid vs. T Rowe Price | Baird Small/mid vs. T Rowe Price | Baird Small/mid vs. T Rowe Price | Baird Small/mid vs. T Rowe Price |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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