Correlation Between Champlain Small and Baron Discovery

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

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

Diversification Opportunities for Champlain Small and Baron Discovery

0.39

Correlation Coefficient

Champlain Small  Baron Discovery

Weak diversification

The 3 months correlation between Champlain and Baron is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Champlain Small and Baron Discovery Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Discovery and Champlain Small 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 Champlain Small are associated (or correlated) with Baron Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Discovery has no effect on the direction of Champlain Small i.e., Champlain Small and Baron Discovery go up and down completely randomly.

Pair Corralation between Champlain Small and Baron Discovery

Assuming the 90 days horizon Champlain Small is expected to generate 3.28 times less return on investment than Baron Discovery. But when comparing it to its historical volatility, Champlain Small is 1.07 times less risky than Baron Discovery. It trades about 0.01 of its potential returns per unit of risk. Baron Discovery Fund is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,746  in Baron Discovery Fund on October 25, 2024 and sell it today you would earn a total of  747.00  from holding Baron Discovery Fund or generate 27.2% return on investment over 90 days.

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

Champlain Small  vs.  Baron Discovery Fund

Champlain Small

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Champlain Small are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Champlain Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Baron Discovery

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Discovery Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baron Discovery showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Champlain Small and Baron Discovery

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

The idea behind Champlain Small and Baron Discovery 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.