Correlation Between Baron Select and Baron Growth

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

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

Diversification Opportunities for Baron Select and Baron Growth

0.85

Correlation Coefficient

Baron Select  Baron Growth

Very poor diversification

The 3 months correlation between Baron and Baron is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Baron Select Funds and Baron Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Growth and Baron Select 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 Select Funds are associated (or correlated) with Baron Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Growth has no effect on the direction of Baron Select i.e., Baron Select and Baron Growth go up and down completely randomly.

Pair Corralation between Baron Select and Baron Growth

Assuming the 90 days horizon Baron Select Funds is expected to under-perform the Baron Growth. In addition to that, Baron Select is 2.15 times more volatile than Baron Growth Fund. It trades about -0.08 of its total potential returns per unit of risk. Baron Growth Fund is currently generating about -0.05 per unit of volatility. If you would invest  9,555  in Baron Growth Fund on December 28, 2024 and sell it today you would lose (317.00) from holding Baron Growth Fund or give up 3.32% of portfolio value over 90 days.

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

Baron Select Funds  vs.  Baron Growth Fund

Baron Select Funds

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baron Select Funds has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Baron Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baron Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Baron Growth 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 Select and Baron Growth

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

The idea behind Baron Select Funds and Baron Growth Fund 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.