Correlation Between Baron Capital and XS Financial

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

By analyzing existing cross correlation between Baron Capital and XS Financial, you can compare the effects of market volatilities on Baron Capital and XS Financial 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 XS Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Capital and XS Financial.

Diversification Opportunities for Baron Capital and XS Financial

-0.29

Correlation Coefficient

Baron Capital  XS Financial

Very good diversification

The 3 months correlation between Baron and XSHLF is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Baron Capital and XS Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XS Financial 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 XS Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XS Financial has no effect on the direction of Baron Capital i.e., Baron Capital and XS Financial go up and down completely randomly.

Pair Corralation between Baron Capital and XS Financial

Given the investment horizon of 90 days Baron Capital is expected to generate 18.88 times more return on investment than XS Financial. However, Baron Capital is 18.88 times more volatile than XS Financial. It trades about 0.09 of its potential returns per unit of risk. XS Financial is currently generating about 0.22 per unit of risk. If you would invest  0.04  in Baron Capital on September 3, 2024 and sell it today you would lose (0.01) from holding Baron Capital or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	32.81%
Values	Daily Returns

Baron Capital  vs.  XS Financial

Baron Capital

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Capital are ranked lower than 7 (%) 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.

XS Financial

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days XS Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile essential indicators, XS Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baron Capital and XS Financial

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

The idea behind Baron Capital and XS Financial 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.