Correlation Between Baron Health and Dreyfus Short

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

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

Diversification Opportunities for Baron Health and Dreyfus Short

0.22

Correlation Coefficient

Baron Health  Dreyfus Short

Modest diversification

The 3 months correlation between Baron and Dreyfus is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Baron Health Care and Dreyfus Short Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Short Interm and Baron Health 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 Health Care are associated (or correlated) with Dreyfus Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Short Interm has no effect on the direction of Baron Health i.e., Baron Health and Dreyfus Short go up and down completely randomly.

Pair Corralation between Baron Health and Dreyfus Short

Assuming the 90 days horizon Baron Health Care is expected to under-perform the Dreyfus Short. In addition to that, Baron Health is 10.17 times more volatile than Dreyfus Short Intermediate. It trades about -0.04 of its total potential returns per unit of risk. Dreyfus Short Intermediate is currently generating about 0.06 per unit of volatility. If you would invest  1,278  in Dreyfus Short Intermediate on September 5, 2024 and sell it today you would earn a total of  4.00  from holding Dreyfus Short Intermediate or generate 0.31% return on investment over 90 days.

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

Baron Health Care  vs.  Dreyfus Short Intermediate

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 fairly strong technical indicators, Baron Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dreyfus Short Interm

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Short Intermediate are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Dreyfus Short 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 Health and Dreyfus Short

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

The idea behind Baron Health Care and Dreyfus Short Intermediate 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.