Correlation Between M Large and Bbh Intermediate

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

By analyzing existing cross correlation between M Large Cap and Bbh Intermediate Municipal, you can compare the effects of market volatilities on M Large and Bbh Intermediate 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 M Large with a short position of Bbh Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of M Large and Bbh Intermediate.

Diversification Opportunities for M Large and Bbh Intermediate

-0.22

Correlation Coefficient

M Large  Bbh Intermediate

Very good diversification

The 3 months correlation between MTCGX and Bbh is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding M Large Cap and Bbh Intermediate Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bbh Intermediate Mun and M Large 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 M Large Cap are associated (or correlated) with Bbh Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bbh Intermediate Mun has no effect on the direction of M Large i.e., M Large and Bbh Intermediate go up and down completely randomly.

Pair Corralation between M Large and Bbh Intermediate

Assuming the 90 days horizon M Large Cap is expected to generate 7.78 times more return on investment than Bbh Intermediate. However, M Large is 7.78 times more volatile than Bbh Intermediate Municipal. It trades about 0.08 of its potential returns per unit of risk. Bbh Intermediate Municipal is currently generating about 0.09 per unit of risk. If you would invest  3,017  in M Large Cap on September 13, 2024 and sell it today you would earn a total of  771.00  from holding M Large Cap or generate 25.56% return on investment over 90 days.

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

M Large Cap  vs.  Bbh Intermediate Municipal

M Large Cap

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in M Large Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, M Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bbh Intermediate Mun

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with M Large and Bbh Intermediate

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

The idea behind M Large Cap and Bbh Intermediate Municipal 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.