Correlation Between Baron Emerging and Invesco Disciplined

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

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

Diversification Opportunities for Baron Emerging and Invesco Disciplined

-0.35

Correlation Coefficient

Baron Emerging  Invesco Disciplined

Very good diversification

The 3 months correlation between Baron and Invesco is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Baron Emerging Markets and Invesco Disciplined Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Disciplined and Baron Emerging 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 Emerging Markets are associated (or correlated) with Invesco Disciplined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Disciplined has no effect on the direction of Baron Emerging i.e., Baron Emerging and Invesco Disciplined go up and down completely randomly.

Pair Corralation between Baron Emerging and Invesco Disciplined

Assuming the 90 days horizon Baron Emerging Markets is expected to generate 1.25 times more return on investment than Invesco Disciplined. However, Baron Emerging is 1.25 times more volatile than Invesco Disciplined Equity. It trades about 0.05 of its potential returns per unit of risk. Invesco Disciplined Equity is currently generating about -0.07 per unit of risk. If you would invest  1,503  in Baron Emerging Markets on December 29, 2024 and sell it today you would earn a total of  50.00  from holding Baron Emerging Markets or generate 3.33% return on investment over 90 days.

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

Baron Emerging Markets  vs.  Invesco Disciplined Equity

Baron Emerging Markets

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Emerging Markets are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Baron Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Disciplined

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Disciplined Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Invesco Disciplined 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 Emerging and Invesco Disciplined

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

The idea behind Baron Emerging Markets and Invesco Disciplined 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.

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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.