Correlation Between Frost Low and Baird Short

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

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

Diversification Opportunities for Frost Low and Baird Short

0.87

Correlation Coefficient

Frost Low  Baird Short

Very poor diversification

The 3 months correlation between Frost and Baird is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Frost Low Duration 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 Frost Low 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 Frost Low Duration are associated (or correlated) with Baird Short. 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 Frost Low i.e., Frost Low and Baird Short go up and down completely randomly.

Pair Corralation between Frost Low and Baird Short

Assuming the 90 days horizon Frost Low is expected to generate 1.01 times less return on investment than Baird Short. But when comparing it to its historical volatility, Frost Low Duration is 1.01 times less risky than Baird Short. It trades about 0.12 of its potential returns per unit of risk. Baird Short Term Bond is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  870.00  in Baird Short Term Bond on October 7, 2024 and sell it today you would earn a total of  76.00  from holding Baird Short Term Bond or generate 8.74% return on investment over 90 days.

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

Frost Low Duration  vs.  Baird Short Term Bond

Frost Low Duration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frost Low Duration has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Frost Low 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

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 basic indicators, Baird Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Frost Low and Baird Short

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

The idea behind Frost Low Duration 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.