Correlation Between Boston Partners and Sarofim Equity

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

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

Diversification Opportunities for Boston Partners and Sarofim Equity

0.54

Correlation Coefficient

Boston Partners  Sarofim Equity

Very weak diversification

The 3 months correlation between Boston and Sarofim is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Boston Partners Small and Sarofim Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarofim Equity and Boston Partners 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 Boston Partners Small are associated (or correlated) with Sarofim Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarofim Equity has no effect on the direction of Boston Partners i.e., Boston Partners and Sarofim Equity go up and down completely randomly.

Pair Corralation between Boston Partners and Sarofim Equity

Assuming the 90 days horizon Boston Partners Small is expected to generate 1.06 times more return on investment than Sarofim Equity. However, Boston Partners is 1.06 times more volatile than Sarofim Equity. It trades about -0.07 of its potential returns per unit of risk. Sarofim Equity is currently generating about -0.11 per unit of risk. If you would invest  2,709  in Boston Partners Small on September 29, 2024 and sell it today you would lose (283.00) from holding Boston Partners Small or give up 10.45% of portfolio value over 90 days.

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

Boston Partners Small  vs.  Sarofim Equity

Boston Partners Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Partners Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Sarofim Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sarofim Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's primary indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Boston Partners and Sarofim Equity

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

The idea behind Boston Partners Small and Sarofim 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.