Correlation Between Baron Health and Prudential Balanced

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

Diversification Opportunities for Baron Health and Prudential Balanced

-0.05

Correlation Coefficient

Baron Health  Prudential Balanced

Good diversification

The 3 months correlation between Baron and Prudential is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Baron Health Care and Prudential Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Balanced 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 Prudential Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Balanced has no effect on the direction of Baron Health i.e., Baron Health and Prudential Balanced go up and down completely randomly.

Pair Corralation between Baron Health and Prudential Balanced

Assuming the 90 days horizon Baron Health Care is expected to under-perform the Prudential Balanced. In addition to that, Baron Health is 1.9 times more volatile than Prudential Balanced. It trades about -0.04 of its total potential returns per unit of risk. Prudential Balanced is currently generating about 0.15 per unit of volatility. If you would invest  1,828  in Prudential Balanced on September 4, 2024 and sell it today you would earn a total of  76.00  from holding Prudential Balanced or generate 4.16% 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.  Prudential Balanced

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.

Prudential Balanced

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Balanced are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Prudential Balanced 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 Prudential Balanced

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

The idea behind Baron Health Care and Prudential Balanced 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.