Correlation Between Baird Aggregate and Baird Intermediate

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

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

Diversification Opportunities for Baird Aggregate and Baird Intermediate

0.99

Correlation Coefficient

Baird Aggregate  Baird Intermediate

No risk reduction

The 3 months correlation between Baird and Baird is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Baird Aggregate Bond and Baird Intermediate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Intermediate Bond and Baird Aggregate 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 Baird Aggregate Bond are associated (or correlated) with Baird Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird Intermediate Bond has no effect on the direction of Baird Aggregate i.e., Baird Aggregate and Baird Intermediate go up and down completely randomly.

Pair Corralation between Baird Aggregate and Baird Intermediate

Assuming the 90 days horizon Baird Aggregate Bond is expected to under-perform the Baird Intermediate. In addition to that, Baird Aggregate is 1.6 times more volatile than Baird Intermediate Bond. It trades about -0.06 of its total potential returns per unit of risk. Baird Intermediate Bond is currently generating about -0.06 per unit of volatility. If you would invest  1,099  in Baird Intermediate Bond on August 31, 2024 and sell it today you would lose (8.00) from holding Baird Intermediate Bond or give up 0.73% of portfolio value over 90 days.

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

Baird Aggregate Bond  vs.  Baird Intermediate Bond

Baird Aggregate Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Baird Intermediate Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Baird Aggregate and Baird Intermediate

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

The idea behind Baird Aggregate Bond and Baird Intermediate Bond 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.