Correlation Between Baron Asset and Baron Wealthbuilder

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

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

Diversification Opportunities for Baron Asset and Baron Wealthbuilder

0.98

Correlation Coefficient

Baron Asset  Baron Wealthbuilder

Almost no diversification

The 3 months correlation between Baron and Baron is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Baron Asset Fund and Baron Wealthbuilder Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Wealthbuilder and Baron 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 Baron Asset Fund 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 Baron Asset i.e., Baron Asset and Baron Wealthbuilder go up and down completely randomly.

Pair Corralation between Baron Asset and Baron Wealthbuilder

Assuming the 90 days horizon Baron Asset is expected to generate 1.35 times less return on investment than Baron Wealthbuilder. But when comparing it to its historical volatility, Baron Asset Fund is 1.12 times less risky than Baron Wealthbuilder. It trades about 0.2 of its potential returns per unit of risk. Baron Wealthbuilder Fund is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,895  in Baron Wealthbuilder Fund on September 3, 2024 and sell it today you would earn a total of  261.00  from holding Baron Wealthbuilder Fund or generate 13.77% return on investment over 90 days.

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

Baron Asset Fund  vs.  Baron Wealthbuilder Fund

Baron Asset Fund

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Asset Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baron Asset may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Baron Wealthbuilder

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Wealthbuilder Fund are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baron Wealthbuilder showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baron Asset and Baron Wealthbuilder

The main advantage of trading using opposite Baron Asset and Baron Wealthbuilder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baron Asset 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 Baron Asset Fund 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.