Correlation Between Baird Smallcap and Baird Short-term

Can any of the company-specific risk be diversified away by investing in both Baird Smallcap and Baird Short-term 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 Smallcap and Baird Short-term into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Baird Smallcap Value and Baird Short Term Bond, you can compare the effects of market volatilities on Baird Smallcap and Baird Short-term 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 Smallcap with a short position of Baird Short-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baird Smallcap and Baird Short-term.

Diversification Opportunities for Baird Smallcap and Baird Short-term

0.16

Correlation Coefficient

Baird Smallcap  Baird Short-term

Average diversification

The 3 months correlation between Baird and Baird is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Baird Smallcap Value and Baird Short Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Short Term and Baird Smallcap 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 Smallcap Value are associated (or correlated) with Baird Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird Short Term has no effect on the direction of Baird Smallcap i.e., Baird Smallcap and Baird Short-term go up and down completely randomly.

Pair Corralation between Baird Smallcap and Baird Short-term

Assuming the 90 days horizon Baird Smallcap Value is expected to under-perform the Baird Short-term. In addition to that, Baird Smallcap is 8.5 times more volatile than Baird Short Term Bond. It trades about -0.13 of its total potential returns per unit of risk. Baird Short Term Bond is currently generating about -0.17 per unit of volatility. If you would invest  950.00  in Baird Short Term Bond on October 6, 2024 and sell it today you would lose (4.00) from holding Baird Short Term Bond or give up 0.42% of portfolio value over 90 days.

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

Baird Smallcap Value  vs.  Baird Short Term Bond

Baird Smallcap Value

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baird Smallcap Value are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Baird Smallcap showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Baird Smallcap and Baird Short-term

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

The idea behind Baird Smallcap Value and Baird Short Term Bond 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.