Correlation Between Dws Equity and Baron Health

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

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

Diversification Opportunities for Dws Equity and Baron Health

0.11

Correlation Coefficient

Dws Equity  Baron Health

Average diversification

The 3 months correlation between Dws and Baron is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Dws Equity Sector 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 Dws Equity 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 Dws Equity Sector 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 Dws Equity i.e., Dws Equity and Baron Health go up and down completely randomly.

Pair Corralation between Dws Equity and Baron Health

Assuming the 90 days horizon Dws Equity Sector is expected to generate 0.97 times more return on investment than Baron Health. However, Dws Equity Sector is 1.04 times less risky than Baron Health. It trades about -0.19 of its potential returns per unit of risk. Baron Health Care is currently generating about -0.19 per unit of risk. If you would invest  1,895  in Dws Equity Sector on October 9, 2024 and sell it today you would lose (62.00) from holding Dws Equity Sector or give up 3.27% of portfolio value over 90 days.

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

Dws Equity Sector  vs.  Baron Health Care

Dws Equity Sector

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Dws Equity Sector has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Dws Equity 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

0 of 100

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 Dws Equity and Baron Health

The main advantage of trading using opposite Dws Equity and Baron Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dws Equity 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 Dws Equity Sector 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.