Correlation Between Baron Real and Baron Focused

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

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

Diversification Opportunities for Baron Real and Baron Focused

-0.21

Correlation Coefficient

Baron Real  Baron Focused

Very good diversification

The 3 months correlation between Baron and Baron is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Baron Real Estate and Baron Focused Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Focused Growth and Baron Real 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 Real Estate are associated (or correlated) with Baron Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Focused Growth has no effect on the direction of Baron Real i.e., Baron Real and Baron Focused go up and down completely randomly.

Pair Corralation between Baron Real and Baron Focused

Assuming the 90 days horizon Baron Real Estate is expected to generate 1.32 times more return on investment than Baron Focused. However, Baron Real is 1.32 times more volatile than Baron Focused Growth. It trades about 0.09 of its potential returns per unit of risk. Baron Focused Growth is currently generating about 0.01 per unit of risk. If you would invest  4,029  in Baron Real Estate on October 27, 2024 and sell it today you would earn a total of  83.00  from holding Baron Real Estate or generate 2.06% return on investment over 90 days.

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

Baron Real Estate  vs.  Baron Focused Growth

Baron Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baron Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Baron Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Baron Focused Growth

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Baron Real and Baron Focused

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

The idea behind Baron Real Estate and Baron Focused Growth 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.