Correlation Between Baird Strategic and Dreyfus/newton International

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

By analyzing existing cross correlation between Baird Strategic Municipal and Dreyfusnewton International Equity, you can compare the effects of market volatilities on Baird Strategic and Dreyfus/newton International 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 Strategic with a short position of Dreyfus/newton International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baird Strategic and Dreyfus/newton International.

Diversification Opportunities for Baird Strategic and Dreyfus/newton International

0.56

Correlation Coefficient

Baird Strategic  Dreyfus/newton International

Very weak diversification

The 3 months correlation between Baird and Dreyfus/newton is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Baird Strategic Municipal and Dreyfusnewton International Eq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus/newton International and Baird Strategic 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 Strategic Municipal are associated (or correlated) with Dreyfus/newton International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus/newton International has no effect on the direction of Baird Strategic i.e., Baird Strategic and Dreyfus/newton International go up and down completely randomly.

Pair Corralation between Baird Strategic and Dreyfus/newton International

Assuming the 90 days horizon Baird Strategic is expected to generate 12.29 times less return on investment than Dreyfus/newton International. But when comparing it to its historical volatility, Baird Strategic Municipal is 7.14 times less risky than Dreyfus/newton International. It trades about 0.13 of its potential returns per unit of risk. Dreyfusnewton International Equity is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,423  in Dreyfusnewton International Equity on December 24, 2024 and sell it today you would earn a total of  182.00  from holding Dreyfusnewton International Equity or generate 12.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Baird Strategic Municipal  vs.  Dreyfusnewton International Eq

Baird Strategic Municipal

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baird Strategic Municipal are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Baird Strategic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dreyfus/newton International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfusnewton International Equity are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dreyfus/newton International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baird Strategic and Dreyfus/newton International

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

The idea behind Baird Strategic Municipal and Dreyfusnewton International Equity 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.