Correlation Between Baron International and Baron Emerging

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

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

Diversification Opportunities for Baron International and Baron Emerging

0.82

Correlation Coefficient

Baron International  Baron Emerging

Very poor diversification

The 3 months correlation between Baron and Baron is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Baron International Growth and Baron Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Emerging Markets and Baron International 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 International Growth are associated (or correlated) with Baron Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Emerging Markets has no effect on the direction of Baron International i.e., Baron International and Baron Emerging go up and down completely randomly.

Pair Corralation between Baron International and Baron Emerging

Assuming the 90 days horizon Baron International is expected to generate 1.48 times less return on investment than Baron Emerging. But when comparing it to its historical volatility, Baron International Growth is 1.08 times less risky than Baron Emerging. It trades about 0.05 of its potential returns per unit of risk. Baron Emerging Markets is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,318  in Baron Emerging Markets on September 12, 2024 and sell it today you would earn a total of  232.00  from holding Baron Emerging Markets or generate 17.6% return on investment over 90 days.

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

Baron International Growth  vs.  Baron Emerging Markets

Baron International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Baron International Growth are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Baron International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Baron Emerging Markets

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Emerging Markets are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Baron Emerging 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 International and Baron Emerging

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

The idea behind Baron International Growth and Baron Emerging Markets 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.