Correlation Between Walden Equity and Boston Trust

Can any of the company-specific risk be diversified away by investing in both Walden Equity 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 Equity 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 Equity Fund and Boston Trust Midcap, you can compare the effects of market volatilities on Walden Equity 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 Equity with a short position of Boston Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walden Equity and Boston Trust.

Diversification Opportunities for Walden Equity and Boston Trust

0.96

Correlation Coefficient

Walden Equity  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 Equity Fund and Boston Trust Midcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Trust Midcap and Walden Equity 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 Equity 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 Midcap has no effect on the direction of Walden Equity i.e., Walden Equity and Boston Trust go up and down completely randomly.

Pair Corralation between Walden Equity and Boston Trust

Assuming the 90 days horizon Walden Equity is expected to generate 1.56 times less return on investment than Boston Trust. But when comparing it to its historical volatility, Walden Equity Fund is 1.1 times less risky than Boston Trust. It trades about 0.14 of its potential returns per unit of risk. Boston Trust Midcap is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,486  in Boston Trust Midcap on September 3, 2024 and sell it today you would earn a total of  213.00  from holding Boston Trust Midcap or generate 8.57% return on investment over 90 days.

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

Walden Equity Fund  vs.  Boston Trust Midcap

Walden Equity

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walden Equity Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Walden Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Boston Trust Midcap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Trust Midcap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Boston Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Walden Equity and Boston Trust

The main advantage of trading using opposite Walden Equity and Boston Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walden Equity 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 Equity Fund and Boston Trust Midcap 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.