Correlation Between Knights Of and Baird Quality

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

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

Diversification Opportunities for Knights Of and Baird Quality

0.52

Correlation Coefficient

Knights Of  Baird Quality

Very weak diversification

The 3 months correlation between Knights and Baird is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Knights Of Umbus and Baird Quality Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Quality Interm and Knights Of 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 Knights Of Umbus are associated (or correlated) with Baird Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird Quality Interm has no effect on the direction of Knights Of i.e., Knights Of and Baird Quality go up and down completely randomly.

Pair Corralation between Knights Of and Baird Quality

Assuming the 90 days horizon Knights Of Umbus is expected to under-perform the Baird Quality. In addition to that, Knights Of is 9.22 times more volatile than Baird Quality Intermediate. It trades about -0.34 of its total potential returns per unit of risk. Baird Quality Intermediate is currently generating about -0.32 per unit of volatility. If you would invest  1,145  in Baird Quality Intermediate on October 9, 2024 and sell it today you would lose (14.00) from holding Baird Quality Intermediate or give up 1.22% of portfolio value over 90 days.

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

Knights Of Umbus  vs.  Baird Quality Intermediate

Knights Of Umbus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Knights Of Umbus has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Baird Quality Interm

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Knights Of and Baird Quality

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

The idea behind Knights Of Umbus and Baird Quality Intermediate 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.