Correlation Between Federated Max and Baird Strategic

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

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

Diversification Opportunities for Federated Max and Baird Strategic

0.26

Correlation Coefficient

Federated Max  Baird Strategic

Modest diversification

The 3 months correlation between Federated and Baird is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Federated Max Cap Index and Baird Strategic Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Strategic Municipal and Federated Max 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 Federated Max Cap Index are associated (or correlated) with Baird Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird Strategic Municipal has no effect on the direction of Federated Max i.e., Federated Max and Baird Strategic go up and down completely randomly.

Pair Corralation between Federated Max and Baird Strategic

Assuming the 90 days horizon Federated Max Cap Index is expected to under-perform the Baird Strategic. In addition to that, Federated Max is 14.48 times more volatile than Baird Strategic Municipal. It trades about -0.19 of its total potential returns per unit of risk. Baird Strategic Municipal is currently generating about -0.19 per unit of volatility. If you would invest  1,032  in Baird Strategic Municipal on September 27, 2024 and sell it today you would lose (7.00) from holding Baird Strategic Municipal or give up 0.68% of portfolio value over 90 days.

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

Federated Max Cap Index  vs.  Baird Strategic Municipal

Federated Max Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Baird Strategic Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Federated Max and Baird Strategic

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

The idea behind Federated Max Cap Index and Baird Strategic 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.