Correlation Between Frost Total and Baird Ultra

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

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

Diversification Opportunities for Frost Total and Baird Ultra

0.41

Correlation Coefficient

Frost Total  Baird Ultra

Very weak diversification

The 3 months correlation between Frost and Baird is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Frost Total Return and Baird Ultra Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Ultra Short and Frost Total 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 Total Return are associated (or correlated) with Baird Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird Ultra Short has no effect on the direction of Frost Total i.e., Frost Total and Baird Ultra go up and down completely randomly.

Pair Corralation between Frost Total and Baird Ultra

Assuming the 90 days horizon Frost Total Return is expected to generate 6.04 times more return on investment than Baird Ultra. However, Frost Total is 6.04 times more volatile than Baird Ultra Short. It trades about 0.1 of its potential returns per unit of risk. Baird Ultra Short is currently generating about 0.48 per unit of risk. If you would invest  974.00  in Frost Total Return on December 5, 2024 and sell it today you would earn a total of  13.00  from holding Frost Total Return or generate 1.33% return on investment over 90 days.

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

Frost Total Return  vs.  Baird Ultra Short

Frost Total Return

Risk-Adjusted Performance

OK

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

Baird Ultra Short

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Baird Ultra Short are ranked lower than 37 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Baird Ultra 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 Total and Baird Ultra

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

The idea behind Frost Total Return and Baird Ultra Short 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.