Correlation Between Baird Short and Baird Smallmid

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

By analyzing existing cross correlation between Baird Short Term Bond and Baird Smallmid Cap, you can compare the effects of market volatilities on Baird Short and Baird Smallmid 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 Short with a short position of Baird Smallmid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baird Short and Baird Smallmid.

Diversification Opportunities for Baird Short and Baird Smallmid

-0.34

Correlation Coefficient

Baird Short  Baird Smallmid

Very good diversification

The 3 months correlation between Baird and Baird is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Baird Short Term Bond and Baird Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Smallmid Cap and Baird Short 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 Short Term Bond are associated (or correlated) with Baird Smallmid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird Smallmid Cap has no effect on the direction of Baird Short i.e., Baird Short and Baird Smallmid go up and down completely randomly.

Pair Corralation between Baird Short and Baird Smallmid

Assuming the 90 days horizon Baird Short Term Bond is expected to under-perform the Baird Smallmid. But the mutual fund apears to be less risky and, when comparing its historical volatility, Baird Short Term Bond is 10.35 times less risky than Baird Smallmid. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Baird Smallmid Cap is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,576  in Baird Smallmid Cap on September 16, 2024 and sell it today you would earn a total of  189.00  from holding Baird Smallmid Cap or generate 11.99% return on investment over 90 days.

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

Baird Short Term Bond  vs.  Baird Smallmid Cap

Baird Short Term

Risk-Adjusted Performance

0 of 100

Very Weak

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

Baird Smallmid Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baird Smallmid Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baird Smallmid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Baird Short and Baird Smallmid

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

The idea behind Baird Short Term Bond and Baird Smallmid Cap 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.