Correlation Between Deluxe and Baird Medical

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

By analyzing existing cross correlation between Deluxe and Baird Medical Investment, you can compare the effects of market volatilities on Deluxe and Baird Medical 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 Deluxe with a short position of Baird Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deluxe and Baird Medical.

Diversification Opportunities for Deluxe and Baird Medical

-0.58

Correlation Coefficient

Deluxe  Baird Medical

Excellent diversification

The 3 months correlation between Deluxe and Baird is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Deluxe and Baird Medical Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Medical Investment and Deluxe 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 Deluxe are associated (or correlated) with Baird Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird Medical Investment has no effect on the direction of Deluxe i.e., Deluxe and Baird Medical go up and down completely randomly.

Pair Corralation between Deluxe and Baird Medical

Considering the 90-day investment horizon Deluxe is expected to under-perform the Baird Medical. But the stock apears to be less risky and, when comparing its historical volatility, Deluxe is 63.07 times less risky than Baird Medical. The stock trades about -0.18 of its potential returns per unit of risk. The Baird Medical Investment is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  3.26  in Baird Medical Investment on October 11, 2024 and sell it today you would earn a total of  5.75  from holding Baird Medical Investment or generate 176.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	85.71%
Values	Daily Returns

Deluxe  vs.  Baird Medical Investment

Deluxe

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deluxe are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Deluxe showed solid returns over the last few months and may actually be approaching a breakup point.

Baird Medical Investment

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baird Medical Investment are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, Baird Medical showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deluxe and Baird Medical

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

The idea behind Deluxe and Baird Medical Investment 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.