Correlation Between Algorand and Baron Health

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

By analyzing existing cross correlation between Algorand and Baron Health Care, you can compare the effects of market volatilities on Algorand and Baron Health 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 Algorand with a short position of Baron Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algorand and Baron Health.

Diversification Opportunities for Algorand and Baron Health

0.31

Correlation Coefficient

Algorand  Baron Health

Weak diversification

The 3 months correlation between Algorand and Baron is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Algorand and Baron Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Health Care and Algorand 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 Algorand are associated (or correlated) with Baron Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Health Care has no effect on the direction of Algorand i.e., Algorand and Baron Health go up and down completely randomly.

Pair Corralation between Algorand and Baron Health

Assuming the 90 days trading horizon Algorand is expected to under-perform the Baron Health. In addition to that, Algorand is 6.89 times more volatile than Baron Health Care. It trades about -0.14 of its total potential returns per unit of risk. Baron Health Care is currently generating about -0.04 per unit of volatility. If you would invest  1,947  in Baron Health Care on December 21, 2024 and sell it today you would lose (47.00) from holding Baron Health Care or give up 2.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

Algorand  vs.  Baron Health Care

Algorand

Risk-Adjusted Performance

Very Weak

Over the last 90 days Algorand has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Algorand shareholders.

Baron Health Care

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Algorand and Baron Health

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

The idea behind Algorand and Baron Health Care 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.