Correlation Between Baron Small and Aqr Diversified

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

Diversification Opportunities for Baron Small and Aqr Diversified

0.36

Correlation Coefficient

Baron Small  Aqr Diversified

Weak diversification

The 3 months correlation between Baron and Aqr is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Baron Small Cap and Aqr Diversified Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Diversified Arbitrage 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 Aqr Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Diversified Arbitrage has no effect on the direction of Baron Small i.e., Baron Small and Aqr Diversified go up and down completely randomly.

Pair Corralation between Baron Small and Aqr Diversified

Assuming the 90 days horizon Baron Small Cap is expected to generate 5.23 times more return on investment than Aqr Diversified. However, Baron Small is 5.23 times more volatile than Aqr Diversified Arbitrage. It trades about 0.04 of its potential returns per unit of risk. Aqr Diversified Arbitrage is currently generating about 0.05 per unit of risk. If you would invest  2,753  in Baron Small Cap on September 29, 2024 and sell it today you would earn a total of  584.00  from holding Baron Small Cap or generate 21.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Baron Small Cap  vs.  Aqr Diversified Arbitrage

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.

Aqr Diversified Arbitrage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqr Diversified Arbitrage has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Aqr Diversified 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 Small and Aqr Diversified

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

The idea behind Baron Small Cap and Aqr Diversified Arbitrage 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.