Correlation Between Mid Cap and Baron Focused

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

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

Diversification Opportunities for Mid Cap and Baron Focused

0.55

Correlation Coefficient

Mid Cap  Baron Focused

Very weak diversification

The 3 months correlation between Mid and Baron is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth 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 Mid Cap 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 Mid Cap Growth 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 Mid Cap i.e., Mid Cap and Baron Focused go up and down completely randomly.

Pair Corralation between Mid Cap and Baron Focused

Assuming the 90 days horizon Mid Cap Growth is expected to under-perform the Baron Focused. In addition to that, Mid Cap is 1.33 times more volatile than Baron Focused Growth. It trades about -0.03 of its total potential returns per unit of risk. Baron Focused Growth is currently generating about 0.0 per unit of volatility. If you would invest  4,598  in Baron Focused Growth on December 2, 2024 and sell it today you would lose (12.00) from holding Baron Focused Growth or give up 0.26% of portfolio value over 90 days.

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

Mid Cap Growth  vs.  Baron Focused Growth

Mid Cap Growth

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Mid Cap and Baron Focused

The main advantage of trading using opposite Mid Cap and Baron Focused positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap 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 Mid Cap Growth 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.