Correlation Between Meridian Growth and Baron Partners

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

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

Diversification Opportunities for Meridian Growth and Baron Partners

0.31

Correlation Coefficient

Meridian Growth  Baron Partners

Weak diversification

The 3 months correlation between Meridian and Baron is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Meridian Growth Fund and Baron Partners Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Partners and Meridian Growth 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 Meridian Growth Fund are associated (or correlated) with Baron Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Partners has no effect on the direction of Meridian Growth i.e., Meridian Growth and Baron Partners go up and down completely randomly.

Pair Corralation between Meridian Growth and Baron Partners

Assuming the 90 days horizon Meridian Growth Fund is expected to under-perform the Baron Partners. But the mutual fund apears to be less risky and, when comparing its historical volatility, Meridian Growth Fund is 2.74 times less risky than Baron Partners. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Baron Partners Fund is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  17,260  in Baron Partners Fund on October 7, 2024 and sell it today you would earn a total of  3,925  from holding Baron Partners Fund or generate 22.74% return on investment over 90 days.

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

Meridian Growth Fund  vs.  Baron Partners Fund

Meridian Growth

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Meridian Growth Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Meridian Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Baron Partners

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Meridian Growth and Baron Partners

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

The idea behind Meridian Growth Fund and Baron Partners Fund 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.