Correlation Between Baron Capital and Regional Management

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

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

Diversification Opportunities for Baron Capital and Regional Management

0.01

Correlation Coefficient

Baron Capital  Regional Management

Significant diversification

The 3 months correlation between Baron and Regional is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Baron Capital and Regional Management Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Management Corp and Baron Capital 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 Capital are associated (or correlated) with Regional Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Management Corp has no effect on the direction of Baron Capital i.e., Baron Capital and Regional Management go up and down completely randomly.

Pair Corralation between Baron Capital and Regional Management

Given the investment horizon of 90 days Baron Capital is expected to generate 11.6 times more return on investment than Regional Management. However, Baron Capital is 11.6 times more volatile than Regional Management Corp. It trades about 0.14 of its potential returns per unit of risk. Regional Management Corp is currently generating about -0.03 per unit of risk. If you would invest  0.01  in Baron Capital on December 28, 2024 and sell it today you would earn a total of  0.01  from holding Baron Capital or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Baron Capital  vs.  Regional Management Corp

Baron Capital

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Capital are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Baron Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Regional Management Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regional Management Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Regional Management is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Baron Capital and Regional Management

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

The idea behind Baron Capital and Regional Management Corp 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.