Correlation Between Baron Global and Baron Health

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

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

Diversification Opportunities for Baron Global and Baron Health

0.83

Correlation Coefficient

Baron Global  Baron Health

Very poor diversification

The 3 months correlation between Baron and Baron is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Baron Global Advantage and Baron Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Health Care and Baron Global 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 Global Advantage are associated (or correlated) with Baron Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Health Care has no effect on the direction of Baron Global i.e., Baron Global and Baron Health go up and down completely randomly.

Pair Corralation between Baron Global and Baron Health

Assuming the 90 days horizon Baron Global Advantage is expected to under-perform the Baron Health. In addition to that, Baron Global is 1.81 times more volatile than Baron Health Care. It trades about -0.06 of its total potential returns per unit of risk. Baron Health Care is currently generating about -0.03 per unit of volatility. If you would invest  1,930  in Baron Health Care on December 28, 2024 and sell it today you would lose (36.00) from holding Baron Health Care or give up 1.87% of portfolio value over 90 days.

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

Baron Global Advantage  vs.  Baron Health Care

Baron Global Advantage

Risk-Adjusted Performance

Very Weak

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

Baron Health Care

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baron Health Care has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Baron Health 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 Global and Baron Health

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

The idea behind Baron Global Advantage and Baron Health Care 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.

Check out your portfolio center.

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.