Correlation Between Baird Short-term and Transamerica Mid

Can any of the company-specific risk be diversified away by investing in both Baird Short-term and Transamerica Mid 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-term and Transamerica Mid 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 Transamerica Mid Cap, you can compare the effects of market volatilities on Baird Short-term and Transamerica Mid 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-term with a short position of Transamerica Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baird Short-term and Transamerica Mid.

Diversification Opportunities for Baird Short-term and Transamerica Mid

0.21

Correlation Coefficient

Baird Short-term  Transamerica Mid

Modest diversification

The 3 months correlation between Baird and Transamerica is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Baird Short Term Bond and Transamerica Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Mid Cap and Baird Short-term 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 Transamerica Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Mid Cap has no effect on the direction of Baird Short-term i.e., Baird Short-term and Transamerica Mid go up and down completely randomly.

Pair Corralation between Baird Short-term and Transamerica Mid

Assuming the 90 days horizon Baird Short-term is expected to generate 11.44 times less return on investment than Transamerica Mid. But when comparing it to its historical volatility, Baird Short Term Bond is 9.15 times less risky than Transamerica Mid. It trades about 0.22 of its potential returns per unit of risk. Transamerica Mid Cap is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,030  in Transamerica Mid Cap on October 26, 2024 and sell it today you would earn a total of  53.00  from holding Transamerica Mid Cap or generate 5.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Baird Short Term Bond  vs.  Transamerica Mid Cap

Baird Short Term

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baird Short Term Bond are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Baird Short-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Transamerica Mid Cap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Mid Cap are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Transamerica Mid may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Baird Short-term and Transamerica Mid

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

The idea behind Baird Short Term Bond and Transamerica Mid 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.