Correlation Between Baron Durable and Baron Fifth

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

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

Diversification Opportunities for Baron Durable and Baron Fifth

0.86

Correlation Coefficient

Baron Durable  Baron Fifth

Very poor diversification

The 3 months correlation between Baron and Baron is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Baron Durable Advantage and Baron Fifth Avenue in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Fifth Avenue and Baron Durable 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 Durable Advantage are associated (or correlated) with Baron Fifth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Fifth Avenue has no effect on the direction of Baron Durable i.e., Baron Durable and Baron Fifth go up and down completely randomly.

Pair Corralation between Baron Durable and Baron Fifth

Assuming the 90 days horizon Baron Durable Advantage is expected to generate 0.68 times more return on investment than Baron Fifth. However, Baron Durable Advantage is 1.47 times less risky than Baron Fifth. It trades about 0.15 of its potential returns per unit of risk. Baron Fifth Avenue is currently generating about 0.09 per unit of risk. If you would invest  2,942  in Baron Durable Advantage on October 26, 2024 and sell it today you would earn a total of  82.00  from holding Baron Durable Advantage or generate 2.79% return on investment over 90 days.

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

Baron Durable Advantage  vs.  Baron Fifth Avenue

Baron Durable Advantage

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Durable Advantage are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baron Durable may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Baron Fifth Avenue

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Fifth Avenue are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baron Fifth showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baron Durable and Baron Fifth

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

The idea behind Baron Durable Advantage and Baron Fifth Avenue 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.