Correlation Between Boston Trust and Global Stock
Can any of the company-specific risk be diversified away by investing in both Boston Trust and Global Stock 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 Trust and Global Stock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boston Trust Midcap and Global Stock Fund, you can compare the effects of market volatilities on Boston Trust and Global Stock 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 Trust with a short position of Global Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Trust and Global Stock.
Diversification Opportunities for Boston Trust and Global Stock
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Boston and Global is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Boston Trust Midcap and Global Stock Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Stock and Boston Trust 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 Trust Midcap are associated (or correlated) with Global Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Stock has no effect on the direction of Boston Trust i.e., Boston Trust and Global Stock go up and down completely randomly.
Pair Corralation between Boston Trust and Global Stock
Assuming the 90 days horizon Boston Trust Midcap is expected to generate 0.82 times more return on investment than Global Stock. However, Boston Trust Midcap is 1.22 times less risky than Global Stock. It trades about 0.06 of its potential returns per unit of risk. Global Stock Fund is currently generating about 0.03 per unit of risk. If you would invest 2,155 in Boston Trust Midcap on September 4, 2024 and sell it today you would earn a total of 529.00 from holding Boston Trust Midcap or generate 24.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Boston Trust Midcap vs. Global Stock Fund
Performance |
| Timeline |
| Boston Trust Midcap |
| Global Stock |
Boston Trust and Global Stock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Trust and Global Stock
The main advantage of trading using opposite Boston Trust and Global Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Trust position performs unexpectedly, Global Stock 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 Global Stock will offset losses from the drop in Global Stock's long position.| Boston Trust vs. Boston Trust Asset | Boston Trust vs. Virtus Kar Mid Cap | Boston Trust vs. Virtus Kar Mid Cap | Boston Trust vs. Boston Trust Small |
| Global Stock vs. International Stock Fund | Global Stock vs. Global Stock Fund | Global Stock vs. Global Stock Fund | Global Stock vs. Virtus Kar 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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