Correlation Between Baron Real and Capital Income

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

Diversification Opportunities for Baron Real and Capital Income

0.87

Correlation Coefficient

Baron Real  Capital Income

Very poor diversification

The 3 months correlation between Baron and Capital is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Baron Real Estate and Capital Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Income Builder 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 Capital Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Income Builder has no effect on the direction of Baron Real i.e., Baron Real and Capital Income go up and down completely randomly.

Pair Corralation between Baron Real and Capital Income

Assuming the 90 days horizon Baron Real Estate is expected to generate 2.22 times more return on investment than Capital Income. However, Baron Real is 2.22 times more volatile than Capital Income Builder. It trades about 0.06 of its potential returns per unit of risk. Capital Income Builder is currently generating about 0.08 per unit of risk. If you would invest  3,104  in Baron Real Estate on October 24, 2024 and sell it today you would earn a total of  1,003  from holding Baron Real Estate or generate 32.31% return on investment over 90 days.

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

Baron Real Estate  vs.  Capital Income Builder

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 basic indicators, Baron Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Capital Income Builder

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Income Builder has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Capital Income 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 Real and Capital Income

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

The idea behind Baron Real Estate and Capital Income Builder 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.