Correlation Between Fulcrum Diversified and Baron Fintech

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

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

Diversification Opportunities for Fulcrum Diversified and Baron Fintech

0.78

Correlation Coefficient

Fulcrum Diversified  Baron Fintech

Poor diversification

The 3 months correlation between Fulcrum and Baron is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Fulcrum Diversified Absolute and Baron Fintech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Fintech and Fulcrum Diversified 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 Fulcrum Diversified Absolute are associated (or correlated) with Baron Fintech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Fintech has no effect on the direction of Fulcrum Diversified i.e., Fulcrum Diversified and Baron Fintech go up and down completely randomly.

Pair Corralation between Fulcrum Diversified and Baron Fintech

Assuming the 90 days horizon Fulcrum Diversified Absolute is expected to under-perform the Baron Fintech. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fulcrum Diversified Absolute is 2.49 times less risky than Baron Fintech. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Baron Fintech is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,821  in Baron Fintech on December 3, 2024 and sell it today you would lose (27.00) from holding Baron Fintech or give up 1.48% of portfolio value over 90 days.

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

Fulcrum Diversified Absolute  vs.  Baron Fintech

Fulcrum Diversified

Risk-Adjusted Performance

Very Weak

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

Baron Fintech

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Fulcrum Diversified and Baron Fintech

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

The idea behind Fulcrum Diversified Absolute and Baron Fintech 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.