Correlation Between Baron Health and Riverpark/next Century

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

Diversification Opportunities for Baron Health and Riverpark/next Century

0.86

Correlation Coefficient

Baron Health  Riverpark/next Century

Very poor diversification

The 3 months correlation between Baron and Riverpark/next is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Baron Health Care and Riverparknext Century Lg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riverpark/next Century 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 Riverpark/next Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riverpark/next Century has no effect on the direction of Baron Health i.e., Baron Health and Riverpark/next Century go up and down completely randomly.

Pair Corralation between Baron Health and Riverpark/next Century

Assuming the 90 days horizon Baron Health Care is expected to generate 0.58 times more return on investment than Riverpark/next Century. However, Baron Health Care is 1.73 times less risky than Riverpark/next Century. It trades about -0.03 of its potential returns per unit of risk. Riverparknext Century Lg is currently generating about -0.1 per unit of risk. If you would invest  1,964  in Baron Health Care on December 25, 2024 and sell it today you would lose (37.00) from holding Baron Health Care or give up 1.88% of portfolio value over 90 days.

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

Baron Health Care  vs.  Riverparknext Century Lg

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.

Riverpark/next Century

Risk-Adjusted Performance

Very Weak

Over the last 90 days Riverparknext Century Lg has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Baron Health and Riverpark/next Century

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

The idea behind Baron Health Care and Riverparknext Century Lg 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.