Correlation Between Walden Equity and Walden Smid

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

By analyzing existing cross correlation between Walden Equity Fund and Walden Smid Cap, you can compare the effects of market volatilities on Walden Equity and Walden Smid 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 Equity with a short position of Walden Smid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walden Equity and Walden Smid.

Diversification Opportunities for Walden Equity and Walden Smid

0.97

Correlation Coefficient

Walden Equity  Walden Smid

Almost no diversification

The 3 months correlation between Walden and Walden is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Walden Equity Fund and Walden Smid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walden Smid Cap and Walden Equity 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 Equity Fund are associated (or correlated) with Walden Smid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walden Smid Cap has no effect on the direction of Walden Equity i.e., Walden Equity and Walden Smid go up and down completely randomly.

Pair Corralation between Walden Equity and Walden Smid

Assuming the 90 days horizon Walden Equity Fund is expected to generate 0.59 times more return on investment than Walden Smid. However, Walden Equity Fund is 1.71 times less risky than Walden Smid. It trades about 0.07 of its potential returns per unit of risk. Walden Smid Cap is currently generating about 0.02 per unit of risk. If you would invest  3,841  in Walden Equity Fund on September 12, 2024 and sell it today you would earn a total of  24.00  from holding Walden Equity Fund or generate 0.62% return on investment over 90 days.

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

Walden Equity Fund  vs.  Walden Smid Cap

Walden Equity

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walden Equity Fund 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 Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Walden Smid Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walden Smid Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Walden Smid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Walden Equity and Walden Smid

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

The idea behind Walden Equity Fund and Walden Smid Cap 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.