Correlation Between M Large and Baron New

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

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

Diversification Opportunities for M Large and Baron New

0.1

Correlation Coefficient

M Large  Baron New

Average diversification

The 3 months correlation between MTCGX and Baron is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding M Large Cap and Baron New Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron New Asia and M Large 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 M Large Cap are associated (or correlated) with Baron New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron New Asia has no effect on the direction of M Large i.e., M Large and Baron New go up and down completely randomly.

Pair Corralation between M Large and Baron New

Assuming the 90 days horizon M Large Cap is expected to generate 1.23 times more return on investment than Baron New. However, M Large is 1.23 times more volatile than Baron New Asia. It trades about 0.12 of its potential returns per unit of risk. Baron New Asia is currently generating about -0.17 per unit of risk. If you would invest  3,459  in M Large Cap on September 12, 2024 and sell it today you would earn a total of  270.00  from holding M Large Cap or generate 7.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	61.9%
Values	Daily Returns

M Large Cap  vs.  Baron New Asia

M Large Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in M Large Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, M Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Baron New Asia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baron New Asia has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental 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 M Large and Baron New

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

The idea behind M Large Cap and Baron New Asia 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.