Correlation Between Baron Health and Growth Portfolio

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

Diversification Opportunities for Baron Health and Growth Portfolio

-0.35

Correlation Coefficient

Baron Health  Growth Portfolio

Very good diversification

The 3 months correlation between Baron and Growth is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Baron Health Care and Growth Portfolio Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Portfolio Class 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 Growth Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Portfolio Class has no effect on the direction of Baron Health i.e., Baron Health and Growth Portfolio go up and down completely randomly.

Pair Corralation between Baron Health and Growth Portfolio

Assuming the 90 days horizon Baron Health is expected to generate 9.99 times less return on investment than Growth Portfolio. But when comparing it to its historical volatility, Baron Health Care is 2.1 times less risky than Growth Portfolio. It trades about 0.02 of its potential returns per unit of risk. Growth Portfolio Class is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,652  in Growth Portfolio Class on October 22, 2024 and sell it today you would earn a total of  1,994  from holding Growth Portfolio Class or generate 75.19% return on investment over 90 days.

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

Baron Health Care  vs.  Growth Portfolio Class

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 latest weak performance, the Fund's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Growth Portfolio Class

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Portfolio Class are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Growth Portfolio showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baron Health and Growth Portfolio

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

The idea behind Baron Health Care and Growth Portfolio Class 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.