Correlation Between The Brown and Baron International

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

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

Diversification Opportunities for The Brown and Baron International

0.59

Correlation Coefficient

The Brown  Baron International

Very weak diversification

The 3 months correlation between The and Baron is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding The Brown Capital and Baron International Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron International and The Brown 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 The Brown Capital are associated (or correlated) with Baron International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron International has no effect on the direction of The Brown i.e., The Brown and Baron International go up and down completely randomly.

Pair Corralation between The Brown and Baron International

Assuming the 90 days horizon The Brown Capital is expected to under-perform the Baron International. In addition to that, The Brown is 1.27 times more volatile than Baron International Growth. It trades about -0.01 of its total potential returns per unit of risk. Baron International Growth is currently generating about 0.11 per unit of volatility. If you would invest  2,611  in Baron International Growth on December 18, 2024 and sell it today you would earn a total of  145.00  from holding Baron International Growth or generate 5.55% return on investment over 90 days.

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

The Brown Capital  vs.  Baron International Growth

Brown Capital

Risk-Adjusted Performance

Very Weak

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

Baron International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baron International Growth are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Baron International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with The Brown and Baron International

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

The idea behind The Brown Capital and Baron International Growth 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.