Correlation Between Health Care and Baron Health

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

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

Diversification Opportunities for Health Care and Baron Health

0.97

Correlation Coefficient

Health Care  Baron Health

Almost no diversification

The 3 months correlation between Health and Baron is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Ultrasector and Baron Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Health Care and Health Care 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 Health Care Ultrasector are associated (or correlated) with Baron Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Health Care has no effect on the direction of Health Care i.e., Health Care and Baron Health go up and down completely randomly.

Pair Corralation between Health Care and Baron Health

Assuming the 90 days horizon Health Care is expected to generate 2.0 times less return on investment than Baron Health. In addition to that, Health Care is 1.26 times more volatile than Baron Health Care. It trades about 0.01 of its total potential returns per unit of risk. Baron Health Care is currently generating about 0.04 per unit of volatility. If you would invest  1,761  in Baron Health Care on October 24, 2024 and sell it today you would earn a total of  251.00  from holding Baron Health Care or generate 14.25% return on investment over 90 days.

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

Health Care Ultrasector  vs.  Baron Health Care

Health Care Ultrasector

Risk-Adjusted Performance

0 of 100

Very Weak

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

Baron Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Health Care and Baron Health

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

The idea behind Health Care Ultrasector and Baron Health Care 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.