Correlation Between Walden Midcap and Boston Trust

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

By analyzing existing cross correlation between Walden Midcap Fund and Boston Trust Equity, you can compare the effects of market volatilities on Walden Midcap and Boston Trust 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 Walden Midcap with a short position of Boston Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walden Midcap and Boston Trust.

Diversification Opportunities for Walden Midcap and Boston Trust

0.96

Correlation Coefficient

Walden Midcap  Boston Trust

Almost no diversification

The 3 months correlation between Walden and Boston is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Walden Midcap Fund and Boston Trust Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Trust Equity and Walden Midcap 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 Walden Midcap Fund are associated (or correlated) with Boston Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Trust Equity has no effect on the direction of Walden Midcap i.e., Walden Midcap and Boston Trust go up and down completely randomly.

Pair Corralation between Walden Midcap and Boston Trust

Assuming the 90 days horizon Walden Midcap Fund is expected to generate 1.01 times more return on investment than Boston Trust. However, Walden Midcap is 1.01 times more volatile than Boston Trust Equity. It trades about -0.04 of its potential returns per unit of risk. Boston Trust Equity is currently generating about -0.08 per unit of risk. If you would invest  2,295  in Walden Midcap Fund on December 29, 2024 and sell it today you would lose (45.00) from holding Walden Midcap Fund or give up 1.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Walden Midcap Fund  vs.  Boston Trust Equity

Walden Midcap

Risk-Adjusted Performance

Very Weak

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

Boston Trust Equity

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Walden Midcap and Boston Trust

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

The idea behind Walden Midcap Fund and Boston Trust Equity 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.