Correlation Between Baird Small/mid and Ultralatin America

Can any of the company-specific risk be diversified away by investing in both Baird Small/mid and Ultralatin America 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 Ultralatin America 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 Ultralatin America Profund, you can compare the effects of market volatilities on Baird Small/mid and Ultralatin America 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 Ultralatin America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baird Small/mid and Ultralatin America.

Diversification Opportunities for Baird Small/mid and Ultralatin America

-0.27

Correlation Coefficient

Baird Small/mid  Ultralatin America

Very good diversification

The 3 months correlation between Baird and Ultralatin is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Baird Smallmid Cap and Ultralatin America Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultralatin America 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 Ultralatin America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultralatin America has no effect on the direction of Baird Small/mid i.e., Baird Small/mid and Ultralatin America go up and down completely randomly.

Pair Corralation between Baird Small/mid and Ultralatin America

Assuming the 90 days horizon Baird Small/mid is expected to generate 1.6 times less return on investment than Ultralatin America. But when comparing it to its historical volatility, Baird Smallmid Cap is 3.11 times less risky than Ultralatin America. It trades about 0.25 of its potential returns per unit of risk. Ultralatin America Profund is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,141  in Ultralatin America Profund on October 22, 2024 and sell it today you would earn a total of  54.00  from holding Ultralatin America Profund or generate 4.73% return on investment over 90 days.

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

Baird Smallmid Cap  vs.  Ultralatin America Profund

Baird Smallmid Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baird Smallmid Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baird Small/mid may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Ultralatin America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultralatin America Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward 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 Ultralatin America

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

The idea behind Baird Smallmid Cap and Ultralatin America Profund 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.