Correlation Between Baron Opportunity and Baron Fifth

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

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

Diversification Opportunities for Baron Opportunity and Baron Fifth

0.99

Correlation Coefficient

Baron Opportunity  Baron Fifth

No risk reduction

The 3 months correlation between BARON and Baron is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Baron Opportunity Fund and Baron Fifth Avenue in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Fifth Avenue and Baron Opportunity 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 Opportunity Fund are associated (or correlated) with Baron Fifth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Fifth Avenue has no effect on the direction of Baron Opportunity i.e., Baron Opportunity and Baron Fifth go up and down completely randomly.

Pair Corralation between Baron Opportunity and Baron Fifth

Assuming the 90 days horizon Baron Opportunity Fund is expected to generate 0.9 times more return on investment than Baron Fifth. However, Baron Opportunity Fund is 1.11 times less risky than Baron Fifth. It trades about -0.12 of its potential returns per unit of risk. Baron Fifth Avenue is currently generating about -0.11 per unit of risk. If you would invest  5,099  in Baron Opportunity Fund on December 28, 2024 and sell it today you would lose (643.00) from holding Baron Opportunity Fund or give up 12.61% of portfolio value over 90 days.

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

Baron Opportunity Fund  vs.  Baron Fifth Avenue

Baron Opportunity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baron Opportunity Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Baron Fifth Avenue

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baron Fifth Avenue has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Baron Opportunity and Baron Fifth

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

The idea behind Baron Opportunity Fund and Baron Fifth Avenue 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.