Correlation Between Boston Trust and Walden Smid

Can any of the company-specific risk be diversified away by investing in both Boston Trust and Walden Smid 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 Boston Trust and Walden Smid into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Boston Trust Midcap and Walden Smid Cap, you can compare the effects of market volatilities on Boston Trust and Walden Smid 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 Boston Trust with a short position of Walden Smid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Trust and Walden Smid.

Diversification Opportunities for Boston Trust and Walden Smid

0.97

Correlation Coefficient

Boston Trust  Walden Smid

Almost no diversification

The 3 months correlation between Boston and Walden is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Boston Trust Midcap and Walden Smid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walden Smid Cap and Boston Trust 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 Boston Trust Midcap are associated (or correlated) with Walden Smid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walden Smid Cap has no effect on the direction of Boston Trust i.e., Boston Trust and Walden Smid go up and down completely randomly.

Pair Corralation between Boston Trust and Walden Smid

Assuming the 90 days horizon Boston Trust Midcap is expected to generate 0.91 times more return on investment than Walden Smid. However, Boston Trust Midcap is 1.09 times less risky than Walden Smid. It trades about -0.03 of its potential returns per unit of risk. Walden Smid Cap is currently generating about -0.06 per unit of risk. If you would invest  2,434  in Boston Trust Midcap on December 29, 2024 and sell it today you would lose (46.00) from holding Boston Trust Midcap or give up 1.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Boston Trust Midcap  vs.  Walden Smid Cap

Boston Trust Midcap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boston Trust Midcap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Boston Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Walden Smid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walden Smid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Walden Smid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Boston Trust and Walden Smid

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

The idea behind Boston Trust Midcap and Walden Smid Cap 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.