Correlation Between Baron Growth and Copeland Risk

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

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

Diversification Opportunities for Baron Growth and Copeland Risk

0.78

Correlation Coefficient

Baron Growth  Copeland Risk

Poor diversification

The 3 months correlation between Baron and Copeland is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Baron Growth Fund and Copeland Risk Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copeland Risk Managed and Baron Growth 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 Growth Fund are associated (or correlated) with Copeland Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copeland Risk Managed has no effect on the direction of Baron Growth i.e., Baron Growth and Copeland Risk go up and down completely randomly.

Pair Corralation between Baron Growth and Copeland Risk

Assuming the 90 days horizon Baron Growth Fund is expected to generate 0.9 times more return on investment than Copeland Risk. However, Baron Growth Fund is 1.12 times less risky than Copeland Risk. It trades about -0.11 of its potential returns per unit of risk. Copeland Risk Managed is currently generating about -0.12 per unit of risk. If you would invest  10,879  in Baron Growth Fund on September 29, 2024 and sell it today you would lose (1,264) from holding Baron Growth Fund or give up 11.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Baron Growth Fund  vs.  Copeland Risk Managed

Baron Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baron Growth Fund 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.

Copeland Risk Managed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Copeland Risk Managed 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.

Pair Trading with Baron Growth and Copeland Risk

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

The idea behind Baron Growth Fund and Copeland Risk Managed 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.