Correlation Between Boston Trust and Orinda Income

Can any of the company-specific risk be diversified away by investing in both Boston Trust and Orinda Income 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 Orinda Income 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 Orinda Income Opportunities, you can compare the effects of market volatilities on Boston Trust and Orinda Income 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 Orinda Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Trust and Orinda Income.

Diversification Opportunities for Boston Trust and Orinda Income

0.56

Correlation Coefficient

Boston Trust  Orinda Income

Very weak diversification

The 3 months correlation between Boston and Orinda is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Boston Trust Asset and Orinda Income Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orinda Income Opport 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 Orinda Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orinda Income Opport has no effect on the direction of Boston Trust i.e., Boston Trust and Orinda Income go up and down completely randomly.

Pair Corralation between Boston Trust and Orinda Income

Assuming the 90 days horizon Boston Trust Asset is expected to generate 1.06 times more return on investment than Orinda Income. However, Boston Trust is 1.06 times more volatile than Orinda Income Opportunities. It trades about 0.18 of its potential returns per unit of risk. Orinda Income Opportunities is currently generating about 0.14 per unit of risk. If you would invest  6,381  in Boston Trust Asset on September 4, 2024 and sell it today you would earn a total of  355.00  from holding Boston Trust Asset or generate 5.56% return on investment over 90 days.

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

Boston Trust Asset  vs.  Orinda Income Opportunities

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.

Orinda Income Opport

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orinda Income Opportunities are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Orinda Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Boston Trust and Orinda Income

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

The idea behind Boston Trust Asset and Orinda Income Opportunities 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.