Correlation Between Value Line and Baird Midcap

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

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

Diversification Opportunities for Value Line and Baird Midcap

0.45

Correlation Coefficient

Value Line  Baird Midcap

Very weak diversification

The 3 months correlation between Value and Baird is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Value Line Mid and Baird Midcap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Midcap and Value Line 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 Value Line Mid are associated (or correlated) with Baird Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird Midcap has no effect on the direction of Value Line i.e., Value Line and Baird Midcap go up and down completely randomly.

Pair Corralation between Value Line and Baird Midcap

Assuming the 90 days horizon Value Line Mid is expected to under-perform the Baird Midcap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Value Line Mid is 1.15 times less risky than Baird Midcap. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Baird Midcap Fund is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,230  in Baird Midcap Fund on September 20, 2024 and sell it today you would lose (82.00) from holding Baird Midcap Fund or give up 3.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Value Line Mid  vs.  Baird Midcap Fund

Value Line Mid

Risk-Adjusted Performance

0 of 100

Very Weak

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

Baird Midcap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Value Line and Baird Midcap

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

The idea behind Value Line Mid and Baird Midcap Fund 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.