Correlation Between Value Line and Baron Emerging

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

By analyzing existing cross correlation between Value Line Income and Baron Emerging Markets, you can compare the effects of market volatilities on Value Line and Baron Emerging 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 Value Line with a short position of Baron Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Line and Baron Emerging.

Diversification Opportunities for Value Line and Baron Emerging

-0.79

Correlation Coefficient

Value Line  Baron Emerging

Pay attention - limited upside

The 3 months correlation between Value and Baron is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Value Line Income and Baron Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Emerging Markets and Value Line 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 Value Line Income are associated (or correlated) with Baron Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Emerging Markets has no effect on the direction of Value Line i.e., Value Line and Baron Emerging go up and down completely randomly.

Pair Corralation between Value Line and Baron Emerging

Assuming the 90 days horizon Value Line Income is expected to generate 1.18 times more return on investment than Baron Emerging. However, Value Line is 1.18 times more volatile than Baron Emerging Markets. It trades about 0.13 of its potential returns per unit of risk. Baron Emerging Markets is currently generating about -0.12 per unit of risk. If you would invest  1,205  in Value Line Income on September 28, 2024 and sell it today you would earn a total of  93.00  from holding Value Line Income or generate 7.72% return on investment over 90 days.

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

Value Line Income  vs.  Baron Emerging Markets

Value Line Income

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Value Line Income are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Value Line may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Baron Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baron Emerging Markets 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.

Pair Trading with Value Line and Baron Emerging

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

The idea behind Value Line Income and Baron Emerging Markets 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..