Correlation Between T Rowe and Baron Growth

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

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

Diversification Opportunities for T Rowe and Baron Growth

0.96

Correlation Coefficient

T Rowe  Baron Growth

Almost no diversification

The 3 months correlation between PAMCX and Baron is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Baron Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Growth and T Rowe 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 T Rowe Price are associated (or correlated) with Baron Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Growth has no effect on the direction of T Rowe i.e., T Rowe and Baron Growth go up and down completely randomly.

Pair Corralation between T Rowe and Baron Growth

Assuming the 90 days horizon T Rowe Price is expected to under-perform the Baron Growth. In addition to that, T Rowe is 1.05 times more volatile than Baron Growth Fund. It trades about -0.09 of its total potential returns per unit of risk. Baron Growth Fund is currently generating about -0.05 per unit of volatility. If you would invest  9,555  in Baron Growth Fund on December 28, 2024 and sell it today you would lose (317.00) from holding Baron Growth Fund or give up 3.32% of portfolio value over 90 days.

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

T Rowe Price  vs.  Baron Growth Fund

T Rowe Price

Risk-Adjusted Performance

Very Weak

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

Baron Growth

Risk-Adjusted Performance

Very Weak

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

Pair Trading with T Rowe and Baron Growth

The main advantage of trading using opposite T Rowe and Baron Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe position performs unexpectedly, Baron Growth 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 Growth will offset losses from the drop in Baron Growth's long position.

The idea behind T Rowe Price and Baron Growth 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.