Correlation Between Rbc Small and Baird Small/mid

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

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

Diversification Opportunities for Rbc Small and Baird Small/mid

0.84

Correlation Coefficient

Rbc Small  Baird Small/mid

Very poor diversification

The 3 months correlation between Rbc and Baird is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Rbc Small Cap 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 Rbc Small 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 Rbc Small Cap are associated (or correlated) with Baird Small/mid. 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 Rbc Small i.e., Rbc Small and Baird Small/mid go up and down completely randomly.

Pair Corralation between Rbc Small and Baird Small/mid

Assuming the 90 days horizon Rbc Small Cap is expected to generate 0.83 times more return on investment than Baird Small/mid. However, Rbc Small Cap is 1.21 times less risky than Baird Small/mid. It trades about -0.11 of its potential returns per unit of risk. Baird Smallmid Cap is currently generating about -0.13 per unit of risk. If you would invest  1,122  in Rbc Small Cap on December 27, 2024 and sell it today you would lose (77.00) from holding Rbc Small Cap or give up 6.86% of portfolio value over 90 days.

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

Rbc Small Cap  vs.  Baird Smallmid Cap

Rbc Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rbc Small Cap 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 Smallmid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baird Smallmid Cap 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.

Pair Trading with Rbc Small and Baird Small/mid

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

The idea behind Rbc Small Cap 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.