Correlation Between Municipal Bond and Baron Health

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

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

Diversification Opportunities for Municipal Bond and Baron Health

0.51

Correlation Coefficient

Municipal Bond  Baron Health

Very weak diversification

The 3 months correlation between Municipal and Baron is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Municipal Bond Portfolio and Baron Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Health Care and Municipal Bond 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 Municipal Bond Portfolio are associated (or correlated) with Baron Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Health Care has no effect on the direction of Municipal Bond i.e., Municipal Bond and Baron Health go up and down completely randomly.

Pair Corralation between Municipal Bond and Baron Health

Assuming the 90 days horizon Municipal Bond Portfolio is expected to generate 0.22 times more return on investment than Baron Health. However, Municipal Bond Portfolio is 4.54 times less risky than Baron Health. It trades about -0.02 of its potential returns per unit of risk. Baron Health Care is currently generating about -0.12 per unit of risk. If you would invest  868.00  in Municipal Bond Portfolio on November 30, 2024 and sell it today you would lose (2.00) from holding Municipal Bond Portfolio or give up 0.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Municipal Bond Portfolio  vs.  Baron Health Care

Municipal Bond Portfolio

Risk-Adjusted Performance

Very Weak

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

Baron Health Care

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baron Health Care 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 Municipal Bond and Baron Health

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

The idea behind Municipal Bond Portfolio and Baron Health Care 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.