Correlation Between Baron Partners and Nasdaq-100 Fund

Can any of the company-specific risk be diversified away by investing in both Baron Partners and Nasdaq-100 Fund 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 Nasdaq-100 Fund 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 Nasdaq 100 Fund Investor, you can compare the effects of market volatilities on Baron Partners and Nasdaq-100 Fund 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 Nasdaq-100 Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Partners and Nasdaq-100 Fund.

Diversification Opportunities for Baron Partners and Nasdaq-100 Fund

0.77

Correlation Coefficient

Baron Partners  Nasdaq-100 Fund

Poor diversification

The 3 months correlation between Baron and Nasdaq-100 is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Baron Partners Fund and Nasdaq 100 Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 Fund 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 Nasdaq-100 Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 Fund has no effect on the direction of Baron Partners i.e., Baron Partners and Nasdaq-100 Fund go up and down completely randomly.

Pair Corralation between Baron Partners and Nasdaq-100 Fund

Assuming the 90 days horizon Baron Partners Fund is expected to generate 2.04 times more return on investment than Nasdaq-100 Fund. However, Baron Partners is 2.04 times more volatile than Nasdaq 100 Fund Investor. It trades about 0.18 of its potential returns per unit of risk. Nasdaq 100 Fund Investor is currently generating about 0.14 per unit of risk. If you would invest  15,223  in Baron Partners Fund on September 2, 2024 and sell it today you would earn a total of  3,795  from holding Baron Partners Fund or generate 24.93% return on investment over 90 days.

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

Baron Partners Fund  vs.  Nasdaq 100 Fund Investor

Baron Partners

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Partners Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baron Partners showed solid returns over the last few months and may actually be approaching a breakup point.

Nasdaq 100 Fund

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 Fund Investor are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Nasdaq-100 Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Baron Partners and Nasdaq-100 Fund

The main advantage of trading using opposite Baron Partners and Nasdaq-100 Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baron Partners position performs unexpectedly, Nasdaq-100 Fund 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 Nasdaq-100 Fund will offset losses from the drop in Nasdaq-100 Fund's long position.

The idea behind Baron Partners Fund and Nasdaq 100 Fund Investor 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.