Correlation Between Boston Partners and Extended Market
Can any of the company-specific risk be diversified away by investing in both Boston Partners and Extended Market 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 Boston Partners and Extended Market into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boston Partners Small and Extended Market Index, you can compare the effects of market volatilities on Boston Partners and Extended Market 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 Boston Partners with a short position of Extended Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Partners and Extended Market.
Diversification Opportunities for Boston Partners and Extended Market
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Boston and Extended is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Boston Partners Small and Extended Market Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extended Market Index and Boston Partners 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 Boston Partners Small are associated (or correlated) with Extended Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extended Market Index has no effect on the direction of Boston Partners i.e., Boston Partners and Extended Market go up and down completely randomly.
Pair Corralation between Boston Partners and Extended Market
Assuming the 90 days horizon Boston Partners Small is expected to generate 0.96 times more return on investment than Extended Market. However, Boston Partners Small is 1.04 times less risky than Extended Market. It trades about -0.13 of its potential returns per unit of risk. Extended Market Index is currently generating about -0.23 per unit of risk. If you would invest 2,491 in Boston Partners Small on November 27, 2024 and sell it today you would lose (57.00) from holding Boston Partners Small or give up 2.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Boston Partners Small vs. Extended Market Index
Performance |
| Timeline |
| Boston Partners Small |
| Extended Market Index |
Boston Partners and Extended Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Partners and Extended Market
The main advantage of trading using opposite Boston Partners and Extended Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Partners position performs unexpectedly, Extended Market 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 Extended Market will offset losses from the drop in Extended Market's long position.| Boston Partners vs. Aggressive Investors 1 | Boston Partners vs. Buffalo Small Cap | Boston Partners vs. Rice Hall James | Boston Partners vs. Putnam Small Cap |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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