Correlation Between Baron Health and Mutual Quest

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

Diversification Opportunities for Baron Health and Mutual Quest

0.37

Correlation Coefficient

Baron Health  Mutual Quest

Weak diversification

The 3 months correlation between Baron and Mutual is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Baron Health Care and Mutual Quest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mutual Quest 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 Mutual Quest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mutual Quest has no effect on the direction of Baron Health i.e., Baron Health and Mutual Quest go up and down completely randomly.

Pair Corralation between Baron Health and Mutual Quest

Assuming the 90 days horizon Baron Health Care is expected to under-perform the Mutual Quest. In addition to that, Baron Health is 1.63 times more volatile than Mutual Quest. It trades about -0.19 of its total potential returns per unit of risk. Mutual Quest is currently generating about -0.09 per unit of volatility. If you would invest  1,486  in Mutual Quest on September 20, 2024 and sell it today you would lose (45.00) from holding Mutual Quest or give up 3.03% of portfolio value over 90 days.

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

Baron Health Care  vs.  Mutual Quest

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 technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Mutual Quest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mutual Quest has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Mutual Quest 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 Mutual Quest

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

The idea behind Baron Health Care and Mutual Quest 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.