Correlation Between Walden Asset and Walden Midcap

Can any of the company-specific risk be diversified away by investing in both Walden Asset and Walden 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 Walden Asset and Walden Midcap 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 Walden Midcap Fund, you can compare the effects of market volatilities on Walden Asset and Walden 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 Walden Asset with a short position of Walden Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walden Asset and Walden Midcap.

Diversification Opportunities for Walden Asset and Walden Midcap

0.81

Correlation Coefficient

Walden Asset  Walden Midcap

Very poor diversification

The 3 months correlation between Walden and Walden is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Walden Asset Management and Walden Midcap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walden Midcap 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 Walden Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walden Midcap has no effect on the direction of Walden Asset i.e., Walden Asset and Walden Midcap go up and down completely randomly.

Pair Corralation between Walden Asset and Walden Midcap

Assuming the 90 days horizon Walden Asset is expected to generate 2.41 times less return on investment than Walden Midcap. But when comparing it to its historical volatility, Walden Asset Management is 1.63 times less risky than Walden Midcap. It trades about 0.14 of its potential returns per unit of risk. Walden Midcap Fund is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,296  in Walden Midcap Fund on September 5, 2024 and sell it today you would earn a total of  214.00  from holding Walden Midcap Fund or generate 9.32% return on investment over 90 days.

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

Walden Asset Management  vs.  Walden Midcap Fund

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.

Walden Midcap

Risk-Adjusted Performance

16 of 100

Good

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

Pair Trading with Walden Asset and Walden Midcap

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

The idea behind Walden Asset Management and Walden 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .