Correlation Between Baron Fifth and Edgewood Growth

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

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

Diversification Opportunities for Baron Fifth and Edgewood Growth

0.93

Correlation Coefficient

Baron Fifth  Edgewood Growth

Almost no diversification

The 3 months correlation between Baron and Edgewood is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Baron Fifth Avenue and Edgewood Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgewood Growth and Baron Fifth 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 Fifth Avenue are associated (or correlated) with Edgewood Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgewood Growth has no effect on the direction of Baron Fifth i.e., Baron Fifth and Edgewood Growth go up and down completely randomly.

Pair Corralation between Baron Fifth and Edgewood Growth

Assuming the 90 days horizon Baron Fifth Avenue is expected to under-perform the Edgewood Growth. In addition to that, Baron Fifth is 1.53 times more volatile than Edgewood Growth Fund. It trades about -0.11 of its total potential returns per unit of risk. Edgewood Growth Fund is currently generating about -0.07 per unit of volatility. If you would invest  4,036  in Edgewood Growth Fund on December 29, 2024 and sell it today you would lose (236.00) from holding Edgewood Growth Fund or give up 5.85% of portfolio value over 90 days.

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

Baron Fifth Avenue  vs.  Edgewood Growth Fund

Baron Fifth Avenue

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baron Fifth Avenue 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 technical 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.

Edgewood Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Edgewood Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Edgewood Growth 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 Fifth and Edgewood Growth

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

The idea behind Baron Fifth Avenue and Edgewood Growth 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.