Correlation Between T Rowe and Baron Asset

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

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

Diversification Opportunities for T Rowe and Baron Asset

0.86

Correlation Coefficient

T Rowe  Baron Asset

Very poor diversification

The 3 months correlation between TRQZX and Baron is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price 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 T Rowe 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 T Rowe Price 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 T Rowe i.e., T Rowe and Baron Asset go up and down completely randomly.

Pair Corralation between T Rowe and Baron Asset

Assuming the 90 days horizon T Rowe Price is expected to generate 0.68 times more return on investment than Baron Asset. However, T Rowe Price is 1.46 times less risky than Baron Asset. It trades about -0.26 of its potential returns per unit of risk. Baron Asset Fund is currently generating about -0.24 per unit of risk. If you would invest  11,683  in T Rowe Price on September 28, 2024 and sell it today you would lose (1,417) from holding T Rowe Price or give up 12.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

T Rowe Price  vs.  Baron Asset Fund

T Rowe Price

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days T Rowe Price 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 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 T Rowe and Baron Asset

The main advantage of trading using opposite T Rowe and Baron Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe 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 T Rowe Price 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.