Correlation Between Qs Large and Baron Focused

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

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

Diversification Opportunities for Qs Large and Baron Focused

0.6

Correlation Coefficient

Qs Large  Baron Focused

Poor diversification

The 3 months correlation between LMTIX and Baron is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Qs Large Cap and Baron Focused Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Focused Growth and Qs Large 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 Qs Large Cap are associated (or correlated) with Baron Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Focused Growth has no effect on the direction of Qs Large i.e., Qs Large and Baron Focused go up and down completely randomly.

Pair Corralation between Qs Large and Baron Focused

Assuming the 90 days horizon Qs Large Cap is expected to generate 0.89 times more return on investment than Baron Focused. However, Qs Large Cap is 1.12 times less risky than Baron Focused. It trades about -0.1 of its potential returns per unit of risk. Baron Focused Growth is currently generating about -0.13 per unit of risk. If you would invest  2,451  in Qs Large Cap on December 20, 2024 and sell it today you would lose (161.00) from holding Qs Large Cap or give up 6.57% of portfolio value over 90 days.

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

Qs Large Cap  vs.  Baron Focused Growth

Qs Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Qs Large Cap 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 Focused Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baron Focused Growth 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.

Pair Trading with Qs Large and Baron Focused

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

The idea behind Qs Large Cap and Baron Focused Growth 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.