Correlation Between Baron Partners and Baron Growth

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

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

Diversification Opportunities for Baron Partners and Baron Growth

-0.41

Correlation Coefficient

Baron Partners  Baron Growth

Very good diversification

The 3 months correlation between Baron and Baron is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Baron Partners and Baron Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Growth and Baron Partners 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 Partners are associated (or correlated) with Baron Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Growth has no effect on the direction of Baron Partners i.e., Baron Partners and Baron Growth go up and down completely randomly.

Pair Corralation between Baron Partners and Baron Growth

Assuming the 90 days horizon Baron Partners is expected to generate 1.15 times more return on investment than Baron Growth. However, Baron Partners is 1.15 times more volatile than Baron Growth Fund. It trades about 0.27 of its potential returns per unit of risk. Baron Growth Fund is currently generating about -0.27 per unit of risk. If you would invest  19,526  in Baron Partners on September 28, 2024 and sell it today you would earn a total of  3,245  from holding Baron Partners or generate 16.62% return on investment over 90 days.

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

Baron Partners  vs.  Baron Growth Fund

Baron Partners

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Partners are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baron Partners showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Baron Partners and Baron Growth

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

The idea behind Baron Partners and Baron Growth Fund 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.