Correlation Between Baron Asset and Baron Small

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

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

Diversification Opportunities for Baron Asset and Baron Small

0.97

Correlation Coefficient

Baron Asset  Baron Small

Almost no diversification

The 3 months correlation between Baron and Baron is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Baron Asset Fund and Baron Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Small Cap and Baron Asset 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 Baron Asset Fund are associated (or correlated) with Baron Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Small Cap has no effect on the direction of Baron Asset i.e., Baron Asset and Baron Small go up and down completely randomly.

Pair Corralation between Baron Asset and Baron Small

Assuming the 90 days horizon Baron Asset Fund is expected to under-perform the Baron Small. In addition to that, Baron Asset is 1.12 times more volatile than Baron Small Cap. It trades about -0.1 of its total potential returns per unit of risk. Baron Small Cap is currently generating about -0.08 per unit of volatility. If you would invest  3,749  in Baron Small Cap on September 28, 2024 and sell it today you would lose (373.00) from holding Baron Small Cap or give up 9.95% of portfolio value over 90 days.

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

Baron Asset Fund  vs.  Baron Small Cap

Baron Asset Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baron Asset Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Baron Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baron Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Baron Asset and Baron Small

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

The idea behind Baron Asset Fund and Baron Small Cap 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.