Correlation Between Global Opportunity and Baron Emerging

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

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

Diversification Opportunities for Global Opportunity and Baron Emerging

0.29

Correlation Coefficient

Global Opportunity  Baron Emerging

Modest diversification

The 3 months correlation between Global and Baron is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Global Opportunity Portfolio and Baron Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Emerging Markets and Global Opportunity 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 Global Opportunity Portfolio are associated (or correlated) with Baron Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Emerging Markets has no effect on the direction of Global Opportunity i.e., Global Opportunity and Baron Emerging go up and down completely randomly.

Pair Corralation between Global Opportunity and Baron Emerging

Assuming the 90 days horizon Global Opportunity is expected to generate 6.52 times less return on investment than Baron Emerging. In addition to that, Global Opportunity is 1.17 times more volatile than Baron Emerging Markets. It trades about 0.01 of its total potential returns per unit of risk. Baron Emerging Markets is currently generating about 0.09 per unit of volatility. If you would invest  1,502  in Baron Emerging Markets on December 19, 2024 and sell it today you would earn a total of  90.00  from holding Baron Emerging Markets or generate 5.99% return on investment over 90 days.

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

Global Opportunity Portfolio  vs.  Baron Emerging Markets

Global Opportunity

Risk-Adjusted Performance

Very Weak

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

Baron Emerging Markets

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Emerging Markets are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Baron Emerging may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Global Opportunity and Baron Emerging

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

The idea behind Global Opportunity Portfolio and Baron Emerging Markets 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.