Correlation Between Stellar and Baron Opportunity

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

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

Diversification Opportunities for Stellar and Baron Opportunity

0.68

Correlation Coefficient

Stellar  Baron Opportunity

Poor diversification

The 3 months correlation between Stellar and Baron is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Baron Opportunity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Opportunity and Stellar 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 Stellar 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 Stellar i.e., Stellar and Baron Opportunity go up and down completely randomly.

Pair Corralation between Stellar and Baron Opportunity

Assuming the 90 days trading horizon Stellar is expected to generate 6.45 times more return on investment than Baron Opportunity. However, Stellar is 6.45 times more volatile than Baron Opportunity Fund. It trades about 0.11 of its potential returns per unit of risk. Baron Opportunity Fund is currently generating about 0.05 per unit of risk. If you would invest  38.00  in Stellar on October 25, 2024 and sell it today you would earn a total of  5.00  from holding Stellar or generate 13.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.71%
Values	Daily Returns

Stellar  vs.  Baron Opportunity Fund

Stellar

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Stellar exhibited solid returns over the last few months and may actually be approaching a breakup point.

Baron Opportunity

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Opportunity Fund are ranked lower than 8 (%) 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 Stellar and Baron Opportunity

The main advantage of trading using opposite Stellar and Baron Opportunity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stellar 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 Stellar 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.