Correlation Between Baird Short-term and Tax-exempt Fund

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

Diversification Opportunities for Baird Short-term and Tax-exempt Fund

0.68

Correlation Coefficient

Baird Short-term  Tax-exempt Fund

Poor diversification

The 3 months correlation between Baird and Tax-exempt is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Baird Short Term Bond and Tax Exempt Fund Of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Exempt Fund 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 Tax-exempt Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Exempt Fund has no effect on the direction of Baird Short-term i.e., Baird Short-term and Tax-exempt Fund go up and down completely randomly.

Pair Corralation between Baird Short-term and Tax-exempt Fund

Assuming the 90 days horizon Baird Short Term Bond is expected to generate 0.44 times more return on investment than Tax-exempt Fund. However, Baird Short Term Bond is 2.29 times less risky than Tax-exempt Fund. It trades about -0.06 of its potential returns per unit of risk. Tax Exempt Fund Of is currently generating about -0.03 per unit of risk. If you would invest  949.00  in Baird Short Term Bond on October 6, 2024 and sell it today you would lose (3.00) from holding Baird Short Term Bond or give up 0.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.62%
Values	Daily Returns

Baird Short Term Bond  vs.  Tax Exempt Fund Of

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-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tax Exempt Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tax Exempt Fund Of has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Tax-exempt 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 Short-term and Tax-exempt Fund

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

The idea behind Baird Short Term Bond and Tax Exempt Fund Of 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.