Correlation Between Astar and Baron Wealthbuilder

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

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

Diversification Opportunities for Astar and Baron Wealthbuilder

0.5

Correlation Coefficient

Astar  Baron Wealthbuilder

Very weak diversification

The 3 months correlation between Astar and Baron is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Astar and Baron Wealthbuilder Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Wealthbuilder and Astar 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 Astar are associated (or correlated) with Baron Wealthbuilder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Wealthbuilder has no effect on the direction of Astar i.e., Astar and Baron Wealthbuilder go up and down completely randomly.

Pair Corralation between Astar and Baron Wealthbuilder

Assuming the 90 days trading horizon Astar is expected to generate 5.0 times more return on investment than Baron Wealthbuilder. However, Astar is 5.0 times more volatile than Baron Wealthbuilder Fund. It trades about 0.02 of its potential returns per unit of risk. Baron Wealthbuilder Fund is currently generating about 0.08 per unit of risk. If you would invest  6.24  in Astar on October 12, 2024 and sell it today you would lose (0.23) from holding Astar or give up 3.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Astar  vs.  Baron Wealthbuilder Fund

Astar

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Astar are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Astar is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Baron Wealthbuilder

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Wealthbuilder Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Baron Wealthbuilder is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Astar and Baron Wealthbuilder

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

The idea behind Astar and Baron Wealthbuilder 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.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.