Correlation Between Baird Midcap and Invesco Vertible

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

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

Diversification Opportunities for Baird Midcap and Invesco Vertible

0.88

Correlation Coefficient

Baird Midcap  Invesco Vertible

Very poor diversification

The 3 months correlation between Baird and Invesco is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Baird Midcap Fund and Invesco Vertible Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Vertible Sec and Baird Midcap 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 Midcap Fund are associated (or correlated) with Invesco Vertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Vertible Sec has no effect on the direction of Baird Midcap i.e., Baird Midcap and Invesco Vertible go up and down completely randomly.

Pair Corralation between Baird Midcap and Invesco Vertible

Assuming the 90 days horizon Baird Midcap Fund is expected to under-perform the Invesco Vertible. In addition to that, Baird Midcap is 1.57 times more volatile than Invesco Vertible Securities. It trades about -0.34 of its total potential returns per unit of risk. Invesco Vertible Securities is currently generating about -0.16 per unit of volatility. If you would invest  2,492  in Invesco Vertible Securities on October 11, 2024 and sell it today you would lose (66.00) from holding Invesco Vertible Securities or give up 2.65% of portfolio value over 90 days.

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

Baird Midcap Fund  vs.  Invesco Vertible Securities

Baird Midcap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Invesco Vertible Sec

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Vertible Securities are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Invesco Vertible 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 Midcap and Invesco Vertible

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

The idea behind Baird Midcap Fund and Invesco Vertible Securities 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.