Correlation Between Multisector Bond and Baron Select

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

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

Diversification Opportunities for Multisector Bond and Baron Select

0.58

Correlation Coefficient

Multisector Bond  Baron Select

Very weak diversification

The 3 months correlation between Multisector and Baron is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Multisector Bond Sma and Baron Select Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Select Funds and Multisector Bond 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 Multisector Bond Sma are associated (or correlated) with Baron Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Select Funds has no effect on the direction of Multisector Bond i.e., Multisector Bond and Baron Select go up and down completely randomly.

Pair Corralation between Multisector Bond and Baron Select

Assuming the 90 days horizon Multisector Bond Sma is expected to under-perform the Baron Select. But the mutual fund apears to be less risky and, when comparing its historical volatility, Multisector Bond Sma is 4.29 times less risky than Baron Select. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Baron Select Funds is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,156  in Baron Select Funds on October 24, 2024 and sell it today you would earn a total of  214.00  from holding Baron Select Funds or generate 18.51% return on investment over 90 days.

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

Multisector Bond Sma  vs.  Baron Select Funds

Multisector Bond Sma

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Multisector Bond Sma are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Multisector Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Baron Select Funds

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Select Funds are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Baron Select showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Multisector Bond and Baron Select

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

The idea behind Multisector Bond Sma and Baron Select Funds 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.