Correlation Between Walden Asset and Boston Trust

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

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

Diversification Opportunities for Walden Asset and Boston Trust

0.79

Correlation Coefficient

Walden Asset  Boston Trust

Poor diversification

The 3 months correlation between Walden and Boston is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Walden Asset Management and Boston Trust Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Trust Small and Walden Asset 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 Walden Asset Management 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 Small has no effect on the direction of Walden Asset i.e., Walden Asset and Boston Trust go up and down completely randomly.

Pair Corralation between Walden Asset and Boston Trust

Assuming the 90 days horizon Walden Asset is expected to generate 4.05 times less return on investment than Boston Trust. But when comparing it to its historical volatility, Walden Asset Management is 2.69 times less risky than Boston Trust. It trades about 0.13 of its potential returns per unit of risk. Boston Trust Small is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,819  in Boston Trust Small on September 4, 2024 and sell it today you would earn a total of  259.00  from holding Boston Trust Small or generate 14.24% return on investment over 90 days.

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

Walden Asset Management  vs.  Boston Trust Small

Walden Asset Management

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walden Asset Management are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Walden Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Boston Trust Small

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Trust Small are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Boston Trust showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walden Asset and Boston Trust

The main advantage of trading using opposite Walden Asset and Boston Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walden Asset 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 Walden Asset Management and Boston Trust Small 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.