Correlation Between Ab Small and Baron Focused

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

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

Diversification Opportunities for Ab Small and Baron Focused

0.23

Correlation Coefficient

Ab Small  Baron Focused

Modest diversification

The 3 months correlation between SCYVX and Baron is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ab Small Cap and Baron Focused Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Focused Growth and Ab Small 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 Ab Small Cap are associated (or correlated) with Baron Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Focused Growth has no effect on the direction of Ab Small i.e., Ab Small and Baron Focused go up and down completely randomly.

Pair Corralation between Ab Small and Baron Focused

Assuming the 90 days horizon Ab Small Cap is expected to under-perform the Baron Focused. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ab Small Cap is 1.32 times less risky than Baron Focused. The mutual fund trades about -0.37 of its potential returns per unit of risk. The Baron Focused Growth is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,636  in Baron Focused Growth on October 5, 2024 and sell it today you would earn a total of  85.00  from holding Baron Focused Growth or generate 1.83% return on investment over 90 days.

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

Ab Small Cap  vs.  Baron Focused Growth

Ab Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Baron Focused Growth

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Focused Growth are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Baron Focused showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ab Small and Baron Focused

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

The idea behind Ab Small Cap and Baron Focused Growth 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.