Correlation Between Baird Small/mid and Guidepath Growth

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

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

Diversification Opportunities for Baird Small/mid and Guidepath Growth

0.44

Correlation Coefficient

Baird Small/mid  Guidepath Growth

Very weak diversification

The 3 months correlation between Baird and Guidepath is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Baird Smallmid Cap and Guidepath Growth Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidepath Growth All and Baird Small/mid 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 Smallmid Cap are associated (or correlated) with Guidepath Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidepath Growth All has no effect on the direction of Baird Small/mid i.e., Baird Small/mid and Guidepath Growth go up and down completely randomly.

Pair Corralation between Baird Small/mid and Guidepath Growth

Assuming the 90 days horizon Baird Smallmid Cap is expected to under-perform the Guidepath Growth. In addition to that, Baird Small/mid is 1.12 times more volatile than Guidepath Growth Allocation. It trades about -0.15 of its total potential returns per unit of risk. Guidepath Growth Allocation is currently generating about -0.11 per unit of volatility. If you would invest  1,871  in Guidepath Growth Allocation on December 24, 2024 and sell it today you would lose (133.00) from holding Guidepath Growth Allocation or give up 7.11% of portfolio value over 90 days.

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

Baird Smallmid Cap  vs.  Guidepath Growth Allocation

Baird Smallmid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baird Smallmid Cap 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.

Guidepath Growth All

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guidepath Growth Allocation 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.

Pair Trading with Baird Small/mid and Guidepath Growth

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

The idea behind Baird Smallmid Cap and Guidepath Growth Allocation 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.