Correlation Between Plumb Balanced and Baron Fifth

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

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

Diversification Opportunities for Plumb Balanced and Baron Fifth

0.88

Correlation Coefficient

Plumb Balanced  Baron Fifth

Very poor diversification

The 3 months correlation between Plumb and Baron is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Plumb Balanced Fund and Baron Fifth Avenue in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Fifth Avenue and Plumb Balanced 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 Plumb Balanced Fund are associated (or correlated) with Baron Fifth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Fifth Avenue has no effect on the direction of Plumb Balanced i.e., Plumb Balanced and Baron Fifth go up and down completely randomly.

Pair Corralation between Plumb Balanced and Baron Fifth

Assuming the 90 days horizon Plumb Balanced Fund is expected to generate 0.42 times more return on investment than Baron Fifth. However, Plumb Balanced Fund is 2.4 times less risky than Baron Fifth. It trades about -0.06 of its potential returns per unit of risk. Baron Fifth Avenue is currently generating about -0.1 per unit of risk. If you would invest  3,695  in Plumb Balanced Fund on December 27, 2024 and sell it today you would lose (109.00) from holding Plumb Balanced Fund or give up 2.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Plumb Balanced Fund  vs.  Baron Fifth Avenue

Plumb Balanced

Risk-Adjusted Performance

Very Weak

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

Baron Fifth Avenue

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baron Fifth Avenue has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Plumb Balanced and Baron Fifth

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

The idea behind Plumb Balanced Fund and Baron Fifth Avenue 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.