Correlation Between Nicholas Financial and Baron Capital

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

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

Diversification Opportunities for Nicholas Financial and Baron Capital

0.55

Correlation Coefficient

Nicholas Financial  Baron Capital

Very weak diversification

The 3 months correlation between Nicholas and Baron is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Nicholas Financial and Baron Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Capital and Nicholas Financial 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 Nicholas Financial are associated (or correlated) with Baron Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Capital has no effect on the direction of Nicholas Financial i.e., Nicholas Financial and Baron Capital go up and down completely randomly.

Pair Corralation between Nicholas Financial and Baron Capital

Given the investment horizon of 90 days Nicholas Financial is expected to generate 7.63 times less return on investment than Baron Capital. But when comparing it to its historical volatility, Nicholas Financial is 8.98 times less risky than Baron Capital. It trades about 0.11 of its potential returns per unit of risk. Baron Capital is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.04  in Baron Capital on September 4, 2024 and sell it today you would lose (0.01) from holding Baron Capital or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	30.16%
Values	Daily Returns

Nicholas Financial  vs.  Baron Capital

Nicholas Financial

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Nicholas Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite unfluctuating fundamental indicators, Nicholas Financial disclosed solid returns over the last few months and may actually be approaching a breakup point.

Baron Capital

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Capital are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Baron Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nicholas Financial and Baron Capital

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

The idea behind Nicholas Financial and Baron Capital 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.