Correlation Between Baron Discovery and Cullen Enhanced

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

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

Diversification Opportunities for Baron Discovery and Cullen Enhanced

-0.03

Correlation Coefficient

Baron Discovery  Cullen Enhanced

Good diversification

The 3 months correlation between Baron and Cullen is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Baron Discovery Fund and Cullen Enhanced Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cullen Enhanced Equity and Baron Discovery 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 Discovery Fund are associated (or correlated) with Cullen Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cullen Enhanced Equity has no effect on the direction of Baron Discovery i.e., Baron Discovery and Cullen Enhanced go up and down completely randomly.

Pair Corralation between Baron Discovery and Cullen Enhanced

Assuming the 90 days horizon Baron Discovery Fund is expected to under-perform the Cullen Enhanced. In addition to that, Baron Discovery is 2.69 times more volatile than Cullen Enhanced Equity. It trades about -0.02 of its total potential returns per unit of risk. Cullen Enhanced Equity is currently generating about 0.15 per unit of volatility. If you would invest  1,011  in Cullen Enhanced Equity on December 28, 2024 and sell it today you would earn a total of  59.00  from holding Cullen Enhanced Equity or generate 5.84% return on investment over 90 days.

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

Baron Discovery Fund  vs.  Cullen Enhanced Equity

Baron Discovery

Risk-Adjusted Performance

Very Weak

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

Cullen Enhanced Equity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cullen Enhanced Equity are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Cullen Enhanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Baron Discovery and Cullen Enhanced

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

The idea behind Baron Discovery Fund and Cullen Enhanced Equity 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.