Correlation Between Baird Quality and Grant Park

Can any of the company-specific risk be diversified away by investing in both Baird Quality and Grant Park 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 Grant Park 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 Grant Park Multi, you can compare the effects of market volatilities on Baird Quality and Grant Park 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 Grant Park. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baird Quality and Grant Park.

Diversification Opportunities for Baird Quality and Grant Park

0.41

Correlation Coefficient

Baird Quality  Grant Park

Very weak diversification

The 3 months correlation between Baird and Grant is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Baird Quality Intermediate and Grant Park Multi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grant Park Multi 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 Grant Park. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grant Park Multi has no effect on the direction of Baird Quality i.e., Baird Quality and Grant Park go up and down completely randomly.

Pair Corralation between Baird Quality and Grant Park

Assuming the 90 days horizon Baird Quality is expected to generate 2.43 times less return on investment than Grant Park. But when comparing it to its historical volatility, Baird Quality Intermediate is 2.62 times less risky than Grant Park. It trades about 0.12 of its potential returns per unit of risk. Grant Park Multi is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,050  in Grant Park Multi on December 19, 2024 and sell it today you would earn a total of  25.00  from holding Grant Park Multi or generate 2.38% return on investment over 90 days.

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

Baird Quality Intermediate  vs.  Grant Park Multi

Baird Quality Interm

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baird Quality Intermediate are ranked lower than 9 (%) 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.

Grant Park Multi

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grant Park Multi are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Grant Park 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 Grant Park

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

The idea behind Baird Quality Intermediate and Grant Park Multi 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.