Correlation Between Baird Midcap and Value Line

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

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

Diversification Opportunities for Baird Midcap and Value Line

0.45

Correlation Coefficient

Baird Midcap  Value Line

Very weak diversification

The 3 months correlation between Baird and Value is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Baird Midcap Fund and Value Line Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Line Mid and Baird 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 Baird Midcap Fund are associated (or correlated) with Value Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Line Mid has no effect on the direction of Baird Midcap i.e., Baird Midcap and Value Line go up and down completely randomly.

Pair Corralation between Baird Midcap and Value Line

Assuming the 90 days horizon Baird Midcap Fund is expected to generate 1.15 times more return on investment than Value Line. However, Baird Midcap is 1.15 times more volatile than Value Line Mid. It trades about -0.05 of its potential returns per unit of risk. Value Line Mid is currently generating about -0.11 per unit of risk. If you would invest  2,230  in Baird Midcap Fund on September 20, 2024 and sell it today you would lose (82.00) from holding Baird Midcap Fund or give up 3.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Baird Midcap Fund  vs.  Value Line Mid

Baird Midcap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Value Line Mid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Value Line Mid has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Value Line 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 Midcap and Value Line

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

The idea behind Baird Midcap Fund and Value Line Mid 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.