Correlation Between The National and Baird Short-term

Can any of the company-specific risk be diversified away by investing in both The National 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 The National 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 The National Tax Free and Baird Short Term Municipal, you can compare the effects of market volatilities on The National 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 The National with a short position of Baird Short-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of The National and Baird Short-term.

Diversification Opportunities for The National and Baird Short-term

0.91

Correlation Coefficient

The National  Baird Short-term

Almost no diversification

The 3 months correlation between The and Baird is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding The National Tax Free and Baird Short Term Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Short Term and The National 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 The National Tax Free 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 The National i.e., The National and Baird Short-term go up and down completely randomly.

Pair Corralation between The National and Baird Short-term

Assuming the 90 days horizon The National is expected to generate 1.23 times less return on investment than Baird Short-term. In addition to that, The National is 2.2 times more volatile than Baird Short Term Municipal. It trades about 0.1 of its total potential returns per unit of risk. Baird Short Term Municipal is currently generating about 0.26 per unit of volatility. If you would invest  989.00  in Baird Short Term Municipal on December 22, 2024 and sell it today you would earn a total of  12.00  from holding Baird Short Term Municipal or generate 1.21% return on investment over 90 days.

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

The National Tax Free  vs.  Baird Short Term Municipal

National Tax

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The National Tax Free are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, The National is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Baird Short Term

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Baird Short Term Municipal are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic 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 The National and Baird Short-term

The main advantage of trading using opposite The National and Baird Short-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The National 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 The National Tax Free and Baird Short Term Municipal 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.