Correlation Between Nasdaq and Baron Asset

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

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

Diversification Opportunities for Nasdaq and Baron Asset

0.23

Correlation Coefficient

Nasdaq  Baron Asset

Modest diversification

The 3 months correlation between Nasdaq and Baron is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Baron Asset Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Asset Fund and Nasdaq 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 Nasdaq Inc are associated (or correlated) with Baron Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Asset Fund has no effect on the direction of Nasdaq i.e., Nasdaq and Baron Asset go up and down completely randomly.

Pair Corralation between Nasdaq and Baron Asset

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.49 times more return on investment than Baron Asset. However, Nasdaq Inc is 2.05 times less risky than Baron Asset. It trades about 0.12 of its potential returns per unit of risk. Baron Asset Fund is currently generating about -0.09 per unit of risk. If you would invest  7,279  in Nasdaq Inc on September 28, 2024 and sell it today you would earn a total of  551.00  from holding Nasdaq Inc or generate 7.57% return on investment over 90 days.

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

Nasdaq Inc  vs.  Baron Asset Fund

Nasdaq Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Baron Asset Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baron Asset Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Nasdaq and Baron Asset

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

The idea behind Nasdaq Inc and Baron Asset 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.