Correlation Between California Bond and Baird Smallcap
Can any of the company-specific risk be diversified away by investing in both California Bond and Baird Smallcap 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 California Bond and Baird Smallcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Bond Fund and Baird Smallcap Value, you can compare the effects of market volatilities on California Bond and Baird Smallcap 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 California Bond with a short position of Baird Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Baird Smallcap.
Diversification Opportunities for California Bond and Baird Smallcap
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between California and Baird is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Baird Smallcap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Smallcap Value and California Bond 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 California Bond Fund are associated (or correlated) with Baird Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird Smallcap Value has no effect on the direction of California Bond i.e., California Bond and Baird Smallcap go up and down completely randomly.
Pair Corralation between California Bond and Baird Smallcap
Assuming the 90 days horizon California Bond is expected to generate 1.75 times less return on investment than Baird Smallcap. But when comparing it to its historical volatility, California Bond Fund is 6.83 times less risky than Baird Smallcap. It trades about 0.07 of its potential returns per unit of risk. Baird Smallcap Value is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,607 in Baird Smallcap Value on September 4, 2024 and sell it today you would earn a total of 107.00 from holding Baird Smallcap Value or generate 6.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Bond Fund vs. Baird Smallcap Value
Performance |
| Timeline |
| California Bond |
| Baird Smallcap Value |
California Bond and Baird Smallcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Bond and Baird Smallcap
The main advantage of trading using opposite California Bond and Baird Smallcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond position performs unexpectedly, Baird Smallcap 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 Smallcap will offset losses from the drop in Baird Smallcap's long position.| California Bond vs. Goldman Sachs Growth | California Bond vs. Smallcap Growth Fund | California Bond vs. L Abbett Growth | California Bond vs. Small Pany Growth |
| Baird Smallcap vs. Scharf Global Opportunity | Baird Smallcap vs. Rational Strategic Allocation | Baird Smallcap vs. Touchstone Large Cap | Baird Smallcap vs. Qs Large 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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