Correlation Between Balanced Strategy and Baron Opportunity

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

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

Diversification Opportunities for Balanced Strategy and Baron Opportunity

0.35

Correlation Coefficient

Balanced Strategy  Baron Opportunity

Weak diversification

The 3 months correlation between Balanced and Baron is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Strategy Fund and Baron Opportunity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Opportunity and Balanced Strategy 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 Balanced Strategy Fund are associated (or correlated) with Baron Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Opportunity has no effect on the direction of Balanced Strategy i.e., Balanced Strategy and Baron Opportunity go up and down completely randomly.

Pair Corralation between Balanced Strategy and Baron Opportunity

Assuming the 90 days horizon Balanced Strategy Fund is expected to under-perform the Baron Opportunity. But the mutual fund apears to be less risky and, when comparing its historical volatility, Balanced Strategy Fund is 2.86 times less risky than Baron Opportunity. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Baron Opportunity Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,806  in Baron Opportunity Fund on October 10, 2024 and sell it today you would earn a total of  346.00  from holding Baron Opportunity Fund or generate 7.2% return on investment over 90 days.

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

Balanced Strategy Fund  vs.  Baron Opportunity Fund

Balanced Strategy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Baron Opportunity

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Opportunity Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baron Opportunity may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Balanced Strategy and Baron Opportunity

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

The idea behind Balanced Strategy Fund and Baron Opportunity 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.