Correlation Between Boston Trust and Walden Asset

Can any of the company-specific risk be diversified away by investing in both Boston Trust and Walden Asset 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 Boston Trust and Walden Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Boston Trust Small and Walden Asset Management, you can compare the effects of market volatilities on Boston Trust and Walden Asset 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 Boston Trust with a short position of Walden Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Trust and Walden Asset.

Diversification Opportunities for Boston Trust and Walden Asset

0.68

Correlation Coefficient

Boston Trust  Walden Asset

Poor diversification

The 3 months correlation between Boston and Walden is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Boston Trust Small and Walden Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walden Asset Management and Boston Trust 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 Boston Trust Small are associated (or correlated) with Walden Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walden Asset Management has no effect on the direction of Boston Trust i.e., Boston Trust and Walden Asset go up and down completely randomly.

Pair Corralation between Boston Trust and Walden Asset

Assuming the 90 days horizon Boston Trust Small is expected to generate 1.49 times more return on investment than Walden Asset. However, Boston Trust is 1.49 times more volatile than Walden Asset Management. It trades about 0.15 of its potential returns per unit of risk. Walden Asset Management is currently generating about -0.05 per unit of risk. If you would invest  1,855  in Boston Trust Small on September 14, 2024 and sell it today you would earn a total of  191.00  from holding Boston Trust Small or generate 10.3% return on investment over 90 days.

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

Boston Trust Small  vs.  Walden Asset Management

Boston Trust Small

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Trust Small are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Boston Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Walden Asset Management

Risk-Adjusted Performance

0 of 100

OK

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

Pair Trading with Boston Trust and Walden Asset

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

The idea behind Boston Trust Small and Walden Asset Management 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.