Correlation Between Boston Trust and Boston Trust

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

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

Diversification Opportunities for Boston Trust and Boston Trust

0.97

Correlation Coefficient

Boston Trust  Boston Trust

Almost no diversification

The 3 months correlation between Boston and Boston is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Boston Trust Asset and Boston Trust Smid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Trust Smid and Boston Trust 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 Trust Asset are associated (or correlated) with Boston Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Trust Smid has no effect on the direction of Boston Trust i.e., Boston Trust and Boston Trust go up and down completely randomly.

Pair Corralation between Boston Trust and Boston Trust

Assuming the 90 days horizon Boston Trust is expected to generate 1.71 times less return on investment than Boston Trust. But when comparing it to its historical volatility, Boston Trust Asset is 1.98 times less risky than Boston Trust. It trades about 0.32 of its potential returns per unit of risk. Boston Trust Smid is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  2,559  in Boston Trust Smid on September 5, 2024 and sell it today you would earn a total of  169.00  from holding Boston Trust Smid or generate 6.6% return on investment over 90 days.

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

Boston Trust Asset  vs.  Boston Trust Smid

Boston Trust Asset

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Trust Asset are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Boston Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Boston Trust Smid

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Trust Smid are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Boston Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Boston Trust and Boston Trust

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

The idea behind Boston Trust Asset and Boston Trust Smid 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.