Correlation Between Baird Smallmid and Amcap Fund

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

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

Diversification Opportunities for Baird Smallmid and Amcap Fund

0.92

Correlation Coefficient

Baird Smallmid  Amcap Fund

Almost no diversification

The 3 months correlation between Baird and Amcap is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Baird Smallmid Cap and Amcap Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amcap Fund Class and Baird Smallmid 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 Smallmid Cap are associated (or correlated) with Amcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amcap Fund Class has no effect on the direction of Baird Smallmid i.e., Baird Smallmid and Amcap Fund go up and down completely randomly.

Pair Corralation between Baird Smallmid and Amcap Fund

Assuming the 90 days horizon Baird Smallmid Cap is expected to generate 1.29 times more return on investment than Amcap Fund. However, Baird Smallmid is 1.29 times more volatile than Amcap Fund Class. It trades about 0.24 of its potential returns per unit of risk. Amcap Fund Class is currently generating about 0.16 per unit of risk. If you would invest  1,549  in Baird Smallmid Cap on September 12, 2024 and sell it today you would earn a total of  239.00  from holding Baird Smallmid Cap or generate 15.43% return on investment over 90 days.

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

Baird Smallmid Cap  vs.  Amcap Fund Class

Baird Smallmid Cap

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Baird Smallmid Cap are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baird Smallmid showed solid returns over the last few months and may actually be approaching a breakup point.

Amcap Fund Class

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amcap Fund Class are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Amcap Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Baird Smallmid and Amcap Fund

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

The idea behind Baird Smallmid Cap and Amcap Fund Class 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.