Correlation Between Baird Midcap and Short-term Fund

Can any of the company-specific risk be diversified away by investing in both Baird Midcap and Short-term Fund 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 Short-term Fund 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 Short Term Fund A, you can compare the effects of market volatilities on Baird Midcap and Short-term Fund 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 Short-term Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baird Midcap and Short-term Fund.

Diversification Opportunities for Baird Midcap and Short-term Fund

-0.69

Correlation Coefficient

Baird Midcap  Short-term Fund

Excellent diversification

The 3 months correlation between Baird and Short-term is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Baird Midcap Fund and Short Term Fund A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Fund 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 Short-term Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Fund has no effect on the direction of Baird Midcap i.e., Baird Midcap and Short-term Fund go up and down completely randomly.

Pair Corralation between Baird Midcap and Short-term Fund

Assuming the 90 days horizon Baird Midcap Fund is expected to under-perform the Short-term Fund. In addition to that, Baird Midcap is 12.26 times more volatile than Short Term Fund A. It trades about -0.14 of its total potential returns per unit of risk. Short Term Fund A is currently generating about 0.24 per unit of volatility. If you would invest  956.00  in Short Term Fund A on December 20, 2024 and sell it today you would earn a total of  12.00  from holding Short Term Fund A or generate 1.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Baird Midcap Fund  vs.  Short Term Fund A

Baird Midcap

Risk-Adjusted Performance

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Short Term Fund

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Short Term Fund A are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Short-term Fund 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 Short-term Fund

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

The idea behind Baird Midcap Fund and Short Term Fund A 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.