Correlation Between Baron Emerging and Baron Fintech

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

Diversification Opportunities for Baron Emerging and Baron Fintech

-0.65

Correlation Coefficient

Baron Emerging  Baron Fintech

Excellent diversification

The 3 months correlation between Baron and Baron is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Baron Emerging Markets and Baron Fintech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Fintech 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 Baron Fintech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Fintech has no effect on the direction of Baron Emerging i.e., Baron Emerging and Baron Fintech go up and down completely randomly.

Pair Corralation between Baron Emerging and Baron Fintech

Assuming the 90 days horizon Baron Emerging Markets is expected to generate 0.7 times more return on investment than Baron Fintech. However, Baron Emerging Markets is 1.43 times less risky than Baron Fintech. It trades about -0.14 of its potential returns per unit of risk. Baron Fintech is currently generating about -0.12 per unit of risk. If you would invest  1,554  in Baron Emerging Markets on October 11, 2024 and sell it today you would lose (57.00) from holding Baron Emerging Markets or give up 3.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.56%
Values	Daily Returns

Baron Emerging Markets  vs.  Baron Fintech

Baron Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baron Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Baron Fintech

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Fintech are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Baron Fintech 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 Baron Fintech

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

The idea behind Baron Emerging Markets and Baron Fintech 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.