Correlation Between Baron Partners and Ishares Russell

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

By analyzing existing cross correlation between Baron Partners and Ishares Russell 1000, you can compare the effects of market volatilities on Baron Partners and Ishares Russell 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 Ishares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Partners and Ishares Russell.

Diversification Opportunities for Baron Partners and Ishares Russell

0.8

Correlation Coefficient

Baron Partners  Ishares Russell

Very poor diversification

The 3 months correlation between Baron and Ishares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Baron Partners and Ishares Russell 1000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ishares Russell 1000 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 are associated (or correlated) with Ishares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ishares Russell 1000 has no effect on the direction of Baron Partners i.e., Baron Partners and Ishares Russell go up and down completely randomly.

Pair Corralation between Baron Partners and Ishares Russell

Assuming the 90 days horizon Baron Partners is expected to generate 2.16 times more return on investment than Ishares Russell. However, Baron Partners is 2.16 times more volatile than Ishares Russell 1000. It trades about 0.08 of its potential returns per unit of risk. Ishares Russell 1000 is currently generating about 0.11 per unit of risk. If you would invest  11,584  in Baron Partners on September 20, 2024 and sell it today you would earn a total of  11,078  from holding Baron Partners or generate 95.63% return on investment over 90 days.

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

Baron Partners  vs.  Ishares Russell 1000

Baron Partners

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Partners are ranked lower than 15 (%) 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.

Ishares Russell 1000

Risk-Adjusted Performance

5 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ishares Russell 1000 are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ishares Russell 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 Partners and Ishares Russell

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

The idea behind Baron Partners and Ishares Russell 1000 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.