Correlation Between Walden Equity and Walden Midcap

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

Diversification Opportunities for Walden Equity and Walden Midcap

0.94

Correlation Coefficient

Walden Equity  Walden Midcap

Almost no diversification

The 3 months correlation between Walden and Walden is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Walden Equity Fund and Walden Midcap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walden 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 Walden Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walden Midcap has no effect on the direction of Walden Equity i.e., Walden Equity and Walden Midcap go up and down completely randomly.

Pair Corralation between Walden Equity and Walden Midcap

Assuming the 90 days horizon Walden Equity Fund is expected to under-perform the Walden Midcap. In addition to that, Walden Equity is 1.01 times more volatile than Walden Midcap Fund. It trades about -0.1 of its total potential returns per unit of risk. Walden Midcap Fund is currently generating about -0.04 per unit of volatility. 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 Equity Fund  vs.  Walden Midcap Fund

Walden Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walden Equity Fund has generated negative risk-adjusted returns adding no value to fund investors. 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.

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.

Pair Trading with Walden Equity and Walden Midcap

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

The idea behind Walden Equity Fund and Walden Midcap Fund 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.