Correlation Between Baron Small and Baron Fintech

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

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

Diversification Opportunities for Baron Small and Baron Fintech

0.46

Correlation Coefficient

Baron Small  Baron Fintech

Very weak diversification

The 3 months correlation between Baron and Baron is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Baron Small Cap and Baron Fintech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Fintech and Baron Small 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 Small Cap are associated (or correlated) with Baron Fintech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Fintech has no effect on the direction of Baron Small i.e., Baron Small and Baron Fintech go up and down completely randomly.

Pair Corralation between Baron Small and Baron Fintech

Assuming the 90 days horizon Baron Small is expected to generate 1.98 times less return on investment than Baron Fintech. In addition to that, Baron Small is 1.38 times more volatile than Baron Fintech. It trades about 0.04 of its total potential returns per unit of risk. Baron Fintech is currently generating about 0.1 per unit of volatility. If you would invest  1,154  in Baron Fintech on September 28, 2024 and sell it today you would earn a total of  639.00  from holding Baron Fintech or generate 55.37% return on investment over 90 days.

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

Baron Small Cap  vs.  Baron Fintech

Baron Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baron Small Cap 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.

Baron Fintech

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Fintech are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baron Fintech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Baron Small and Baron Fintech

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

The idea behind Baron Small Cap and Baron Fintech 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.