Correlation Between Baird Quality and Aama Equity

Can any of the company-specific risk be diversified away by investing in both Baird Quality and Aama Equity 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 Quality and Aama Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Baird Quality Intermediate and Aama Equity Fund, you can compare the effects of market volatilities on Baird Quality and Aama Equity 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 Quality with a short position of Aama Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baird Quality and Aama Equity.

Diversification Opportunities for Baird Quality and Aama Equity

0.5

Correlation Coefficient

Baird Quality  Aama Equity

Very weak diversification

The 3 months correlation between Baird and Aama is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Baird Quality Intermediate and Aama Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aama Equity Fund and Baird Quality 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 Quality Intermediate are associated (or correlated) with Aama Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aama Equity Fund has no effect on the direction of Baird Quality i.e., Baird Quality and Aama Equity go up and down completely randomly.

Pair Corralation between Baird Quality and Aama Equity

Assuming the 90 days horizon Baird Quality Intermediate is expected to generate 0.11 times more return on investment than Aama Equity. However, Baird Quality Intermediate is 8.98 times less risky than Aama Equity. It trades about -0.05 of its potential returns per unit of risk. Aama Equity Fund is currently generating about -0.12 per unit of risk. If you would invest  1,135  in Baird Quality Intermediate on October 25, 2024 and sell it today you would lose (4.00) from holding Baird Quality Intermediate or give up 0.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Baird Quality Intermediate  vs.  Aama Equity Fund

Baird Quality Interm

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Baird Quality Intermediate are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Baird Quality is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aama Equity Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aama Equity Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Aama Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Baird Quality and Aama Equity

The main advantage of trading using opposite Baird Quality and Aama Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baird Quality position performs unexpectedly, Aama Equity 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 Aama Equity will offset losses from the drop in Aama Equity's long position.

The idea behind Baird Quality Intermediate and Aama Equity Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.