Correlation Between Vanguard Financials and Baron Select

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

By analyzing existing cross correlation between Vanguard Financials Index and Baron Select Funds, you can compare the effects of market volatilities on Vanguard Financials and Baron Select 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 Vanguard Financials with a short position of Baron Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Financials and Baron Select.

Diversification Opportunities for Vanguard Financials and Baron Select

0.92

Correlation Coefficient

Vanguard Financials  Baron Select

Almost no diversification

The 3 months correlation between VANGUARD and Baron is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Financials Index and Baron Select Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Select Funds and Vanguard Financials 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 Vanguard Financials Index are associated (or correlated) with Baron Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Select Funds has no effect on the direction of Vanguard Financials i.e., Vanguard Financials and Baron Select go up and down completely randomly.

Pair Corralation between Vanguard Financials and Baron Select

Assuming the 90 days horizon Vanguard Financials is expected to generate 1.02 times less return on investment than Baron Select. But when comparing it to its historical volatility, Vanguard Financials Index is 1.45 times less risky than Baron Select. It trades about 0.18 of its potential returns per unit of risk. Baron Select Funds is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,040  in Baron Select Funds on August 31, 2024 and sell it today you would earn a total of  273.00  from holding Baron Select Funds or generate 26.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.21%
Values	Daily Returns

Vanguard Financials Index  vs.  Baron Select Funds

Vanguard Financials Index

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Financials Index are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Vanguard Financials showed solid returns over the last few months and may actually be approaching a breakup point.

Baron Select Funds

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Select Funds are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baron Select showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Financials and Baron Select

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

The idea behind Vanguard Financials Index and Baron Select Funds 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.