Correlation Between Baron Partners and Baron Emerging

Can any of the company-specific risk be diversified away by investing in both Baron Partners 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 Partners 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 Partners Fund and Baron Emerging Markets, you can compare the effects of market volatilities on Baron Partners 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 Partners with a short position of Baron Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Partners and Baron Emerging.

Diversification Opportunities for Baron Partners and Baron Emerging

-0.55

Correlation Coefficient

Baron Partners  Baron Emerging

Excellent diversification

The 3 months correlation between Baron and Baron is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Baron Partners Fund 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 Partners 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 Partners Fund 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 Partners i.e., Baron Partners and Baron Emerging go up and down completely randomly.

Pair Corralation between Baron Partners and Baron Emerging

Assuming the 90 days horizon Baron Partners Fund is expected to under-perform the Baron Emerging. In addition to that, Baron Partners is 1.83 times more volatile than Baron Emerging Markets. It trades about -0.21 of its total potential returns per unit of risk. Baron Emerging Markets is currently generating about 0.09 per unit of volatility. If you would invest  1,512  in Baron Emerging Markets on December 19, 2024 and sell it today you would earn a total of  91.00  from holding Baron Emerging Markets or generate 6.02% return on investment over 90 days.

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

Baron Partners Fund  vs.  Baron Emerging Markets

Baron Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baron Partners 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 Emerging Markets

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Emerging Markets are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Baron Emerging may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Baron Partners and Baron Emerging

The main advantage of trading using opposite Baron Partners and Baron Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baron Partners 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 Partners Fund 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.