Correlation Between Baron Fintech and Baron Opportunity

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

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

Diversification Opportunities for Baron Fintech and Baron Opportunity

0.68

Correlation Coefficient

Baron Fintech  Baron Opportunity

Poor diversification

The 3 months correlation between Baron and Baron is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Baron Fintech and Baron Opportunity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Opportunity and Baron Fintech 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 Fintech are associated (or correlated) with Baron Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Opportunity has no effect on the direction of Baron Fintech i.e., Baron Fintech and Baron Opportunity go up and down completely randomly.

Pair Corralation between Baron Fintech and Baron Opportunity

Assuming the 90 days horizon Baron Fintech is expected to generate 0.68 times more return on investment than Baron Opportunity. However, Baron Fintech is 1.47 times less risky than Baron Opportunity. It trades about 0.0 of its potential returns per unit of risk. Baron Opportunity Fund is currently generating about -0.12 per unit of risk. If you would invest  1,757  in Baron Fintech on December 29, 2024 and sell it today you would lose (4.00) from holding Baron Fintech or give up 0.23% of portfolio value over 90 days.

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

Baron Fintech  vs.  Baron Opportunity Fund

Baron Fintech

Risk-Adjusted Performance

Very Weak

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

Baron Opportunity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baron Opportunity 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 April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Baron Fintech and Baron Opportunity

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

The idea behind Baron Fintech and Baron Opportunity 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.