Correlation Between Baron Focused and Baron Asset

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

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

Diversification Opportunities for Baron Focused and Baron Asset

-0.33

Correlation Coefficient

Baron Focused  Baron Asset

Very good diversification

The 3 months correlation between Baron and Baron is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Baron Focused Growth and Baron Asset Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Asset Fund and Baron Focused 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 Focused Growth are associated (or correlated) with Baron Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Asset Fund has no effect on the direction of Baron Focused i.e., Baron Focused and Baron Asset go up and down completely randomly.

Pair Corralation between Baron Focused and Baron Asset

Assuming the 90 days horizon Baron Focused Growth is expected to generate 0.92 times more return on investment than Baron Asset. However, Baron Focused Growth is 1.08 times less risky than Baron Asset. It trades about 0.1 of its potential returns per unit of risk. Baron Asset Fund is currently generating about 0.02 per unit of risk. If you would invest  2,981  in Baron Focused Growth on October 9, 2024 and sell it today you would earn a total of  2,002  from holding Baron Focused Growth or generate 67.16% return on investment over 90 days.

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

Baron Focused Growth  vs.  Baron Asset Fund

Baron Focused Growth

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Focused Growth are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baron Focused showed solid returns over the last few months and may actually be approaching a breakup point.

Baron Asset Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baron Asset Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Baron Focused and Baron Asset

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

The idea behind Baron Focused Growth and Baron Asset Fund 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.