Correlation Between Baron Discovery and Transportation Fund

Can any of the company-specific risk be diversified away by investing in both Baron Discovery and Transportation Fund 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 Transportation Fund 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 Transportation Fund Investor, you can compare the effects of market volatilities on Baron Discovery and Transportation Fund 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 Transportation Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Discovery and Transportation Fund.

Diversification Opportunities for Baron Discovery and Transportation Fund

0.96

Correlation Coefficient

Baron Discovery  Transportation Fund

Almost no diversification

The 3 months correlation between Baron and Transportation is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Baron Discovery Fund and Transportation Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportation Fund 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 Transportation Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportation Fund has no effect on the direction of Baron Discovery i.e., Baron Discovery and Transportation Fund go up and down completely randomly.

Pair Corralation between Baron Discovery and Transportation Fund

Assuming the 90 days horizon Baron Discovery Fund is expected to generate 1.0 times more return on investment than Transportation Fund. However, Baron Discovery Fund is 1.0 times less risky than Transportation Fund. It trades about 0.09 of its potential returns per unit of risk. Transportation Fund Investor is currently generating about 0.07 per unit of risk. If you would invest  3,067  in Baron Discovery Fund on September 30, 2024 and sell it today you would earn a total of  223.00  from holding Baron Discovery Fund or generate 7.27% return on investment over 90 days.

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

Baron Discovery Fund  vs.  Transportation Fund Investor

Baron Discovery

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Discovery Fund are ranked lower than 7 (%) 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.

Transportation Fund

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Transportation Fund Investor are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Transportation Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Baron Discovery and Transportation Fund

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

The idea behind Baron Discovery Fund and Transportation Fund Investor 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.