Correlation Between Baron Discovery and Baron Health

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

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

Diversification Opportunities for Baron Discovery and Baron Health

-0.46

Correlation Coefficient

Baron Discovery  Baron Health

Very good diversification

The 3 months correlation between Baron and Baron is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Baron Discovery Fund 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 Baron Discovery 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 Discovery Fund 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 Baron Discovery i.e., Baron Discovery and Baron Health go up and down completely randomly.

Pair Corralation between Baron Discovery and Baron Health

Assuming the 90 days horizon Baron Discovery Fund is expected to generate 1.41 times more return on investment than Baron Health. However, Baron Discovery is 1.41 times more volatile than Baron Health Care. It trades about -0.17 of its potential returns per unit of risk. Baron Health Care is currently generating about -0.28 per unit of risk. If you would invest  3,483  in Baron Discovery Fund on September 28, 2024 and sell it today you would lose (153.00) from holding Baron Discovery Fund or give up 4.39% of portfolio value over 90 days.

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

Baron Discovery Fund  vs.  Baron Health Care

Baron Discovery

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Discovery 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 Discovery may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 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 Discovery and Baron Health

The main advantage of trading using opposite Baron Discovery and Baron Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baron Discovery 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 Baron Discovery Fund 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.