Correlation Between Fmasx and Baird Smallmid

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

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

Diversification Opportunities for Fmasx and Baird Smallmid

0.51

Correlation Coefficient

Fmasx  Baird Smallmid

Very weak diversification

The 3 months correlation between Fmasx and Baird is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Fmasx and Baird Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Smallmid Cap and Fmasx 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 Fmasx are associated (or correlated) with Baird Smallmid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird Smallmid Cap has no effect on the direction of Fmasx i.e., Fmasx and Baird Smallmid go up and down completely randomly.

Pair Corralation between Fmasx and Baird Smallmid

Assuming the 90 days horizon Fmasx is expected to under-perform the Baird Smallmid. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fmasx is 1.0 times less risky than Baird Smallmid. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Baird Smallmid Cap is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,506  in Baird Smallmid Cap on October 11, 2024 and sell it today you would earn a total of  214.00  from holding Baird Smallmid Cap or generate 14.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	12.32%
Values	Daily Returns

Fmasx  vs.  Baird Smallmid Cap

Fmasx

Risk-Adjusted Performance

0 of 100

Very Weak

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

Baird Smallmid Cap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Baird Smallmid Cap are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Baird Smallmid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fmasx and Baird Smallmid

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

The idea behind Fmasx and Baird Smallmid 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.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.