Correlation Between Baron Global and Hennessy Japan

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

Diversification Opportunities for Baron Global and Hennessy Japan

-0.21

Correlation Coefficient

Baron Global  Hennessy Japan

Very good diversification

The 3 months correlation between Baron and Hennessy is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Baron Global Advantage and Hennessy Japan Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Japan 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 Hennessy Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Japan has no effect on the direction of Baron Global i.e., Baron Global and Hennessy Japan go up and down completely randomly.

Pair Corralation between Baron Global and Hennessy Japan

Assuming the 90 days horizon Baron Global Advantage is expected to generate 0.67 times more return on investment than Hennessy Japan. However, Baron Global Advantage is 1.49 times less risky than Hennessy Japan. It trades about 0.27 of its potential returns per unit of risk. Hennessy Japan Fund is currently generating about 0.04 per unit of risk. If you would invest  3,283  in Baron Global Advantage on September 4, 2024 and sell it today you would earn a total of  615.00  from holding Baron Global Advantage or generate 18.73% return on investment over 90 days.

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

Baron Global Advantage  vs.  Hennessy Japan Fund

Baron Global Advantage

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Global Advantage are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Baron Global showed solid returns over the last few months and may actually be approaching a breakup point.

Hennessy Japan

Risk-Adjusted Performance

3 of 100

Insignificant

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

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

The idea behind Baron Global Advantage and Hennessy Japan 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.