Correlation Between Baron Discovery and Baron International

Can any of the company-specific risk be diversified away by investing in both Baron Discovery 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 Baron Discovery and Baron International 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 Baron International Growth, you can compare the effects of market volatilities on Baron Discovery 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 Baron Discovery with a short position of Baron International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Discovery and Baron International.

Diversification Opportunities for Baron Discovery and Baron International

0.35

Correlation Coefficient

Baron Discovery  Baron International

Weak diversification

The 3 months correlation between Baron and Baron is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Baron Discovery Fund and Baron International Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron International 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 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 Baron Discovery i.e., Baron Discovery and Baron International go up and down completely randomly.

Pair Corralation between Baron Discovery and Baron International

Assuming the 90 days horizon Baron Discovery Fund is expected to under-perform the Baron International. In addition to that, Baron Discovery is 2.01 times more volatile than Baron International Growth. It trades about -0.03 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  2,617  in Baron International Growth on December 19, 2024 and sell it today you would earn a total of  139.00  from holding Baron International Growth or generate 5.31% return on investment over 90 days.

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

Baron Discovery Fund  vs.  Baron International Growth

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 forward indicators, Baron Discovery 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 Baron Discovery and Baron International

The main advantage of trading using opposite Baron Discovery and Baron International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baron Discovery 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 Baron Discovery Fund 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.