Correlation Between Baird Smallcap and Baird Aggregate
Can any of the company-specific risk be diversified away by investing in both Baird Smallcap and Baird Aggregate 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 Baird Smallcap and Baird Aggregate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baird Smallcap Value and Baird Aggregate Bond, you can compare the effects of market volatilities on Baird Smallcap and Baird Aggregate 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 Baird Smallcap with a short position of Baird Aggregate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baird Smallcap and Baird Aggregate.
Diversification Opportunities for Baird Smallcap and Baird Aggregate
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Baird and Baird is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Baird Smallcap Value and Baird Aggregate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Aggregate Bond and Baird Smallcap 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 Baird Smallcap Value are associated (or correlated) with Baird Aggregate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird Aggregate Bond has no effect on the direction of Baird Smallcap i.e., Baird Smallcap and Baird Aggregate go up and down completely randomly.
Pair Corralation between Baird Smallcap and Baird Aggregate
Assuming the 90 days horizon Baird Smallcap Value is expected to generate 3.26 times more return on investment than Baird Aggregate. However, Baird Smallcap is 3.26 times more volatile than Baird Aggregate Bond. It trades about 0.08 of its potential returns per unit of risk. Baird Aggregate Bond is currently generating about 0.03 per unit of risk. If you would invest 1,201 in Baird Smallcap Value on August 26, 2024 and sell it today you would earn a total of 502.00 from holding Baird Smallcap Value or generate 41.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baird Smallcap Value vs. Baird Aggregate Bond
Performance |
| Timeline |
| Baird Smallcap Value |
| Baird Aggregate Bond |
Baird Smallcap and Baird Aggregate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baird Smallcap and Baird Aggregate
The main advantage of trading using opposite Baird Smallcap and Baird Aggregate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baird Smallcap position performs unexpectedly, Baird Aggregate 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 Aggregate will offset losses from the drop in Baird Aggregate's long position.| Baird Smallcap vs. Baird Aggregate Bond | Baird Smallcap vs. Baird Aggregate Bond | Baird Smallcap vs. Baird Short Term Bond | Baird Smallcap vs. Baird Short Term Bond |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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