Correlation Between Baron Health and Elfun Trusts

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

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

Diversification Opportunities for Baron Health and Elfun Trusts

0.5

Correlation Coefficient

Baron Health  Elfun Trusts

Very weak diversification

The 3 months correlation between Baron and Elfun is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Baron Health Care and Elfun Trusts Elfun in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elfun Trusts Elfun and Baron Health 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 Health Care are associated (or correlated) with Elfun Trusts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elfun Trusts Elfun has no effect on the direction of Baron Health i.e., Baron Health and Elfun Trusts go up and down completely randomly.

Pair Corralation between Baron Health and Elfun Trusts

Assuming the 90 days horizon Baron Health Care is expected to generate 0.51 times more return on investment than Elfun Trusts. However, Baron Health Care is 1.95 times less risky than Elfun Trusts. It trades about -0.04 of its potential returns per unit of risk. Elfun Trusts Elfun is currently generating about -0.09 per unit of risk. If you would invest  2,044  in Baron Health Care on October 25, 2024 and sell it today you would lose (29.00) from holding Baron Health Care or give up 1.42% of portfolio value over 90 days.

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

Baron Health Care  vs.  Elfun Trusts Elfun

Baron Health Care

Risk-Adjusted Performance

0 of 100

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.

Elfun Trusts Elfun

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Baron Health Care and Elfun Trusts Elfun 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.