Correlation Between Transportation Fund and Baron Discovery

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

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

Diversification Opportunities for Transportation Fund and Baron Discovery

0.96

Correlation Coefficient

Transportation Fund  Baron Discovery

Almost no diversification

The 3 months correlation between Transportation and Baron is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Transportation Fund Investor and Baron Discovery Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Discovery and Transportation Fund 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 Transportation Fund Investor are associated (or correlated) with Baron Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Discovery has no effect on the direction of Transportation Fund i.e., Transportation Fund and Baron Discovery go up and down completely randomly.

Pair Corralation between Transportation Fund and Baron Discovery

Assuming the 90 days horizon Transportation Fund is expected to generate 2.11 times less return on investment than Baron Discovery. But when comparing it to its historical volatility, Transportation Fund Investor is 1.0 times less risky than Baron Discovery. It trades about 0.06 of its potential returns per unit of risk. Baron Discovery Fund is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,678  in Baron Discovery Fund on September 30, 2024 and sell it today you would earn a total of  612.00  from holding Baron Discovery Fund or generate 22.85% return on investment over 90 days.

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

Transportation Fund Investor  vs.  Baron Discovery Fund

Transportation Fund

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Transportation Fund Investor are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Transportation Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Baron Discovery

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Discovery Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baron Discovery may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Transportation Fund and Baron Discovery

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

The idea behind Transportation Fund Investor and Baron Discovery 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.