Correlation Between Limited Duration and Baron Health
Can any of the company-specific risk be diversified away by investing in both Limited Duration and Baron Health 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 Limited Duration and Baron Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Limited Duration Fund and Baron Health Care, you can compare the effects of market volatilities on Limited Duration and Baron Health 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 Limited Duration with a short position of Baron Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Limited Duration and Baron Health.
Diversification Opportunities for Limited Duration and Baron Health
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between LIMITED and Baron is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Limited Duration Fund and Baron Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Health Care and Limited Duration 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 Limited Duration Fund are associated (or correlated) with Baron Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Health Care has no effect on the direction of Limited Duration i.e., Limited Duration and Baron Health go up and down completely randomly.
Pair Corralation between Limited Duration and Baron Health
Assuming the 90 days horizon Limited Duration Fund is expected to generate 0.11 times more return on investment than Baron Health. However, Limited Duration Fund is 8.93 times less risky than Baron Health. It trades about -0.04 of its potential returns per unit of risk. Baron Health Care is currently generating about -0.09 per unit of risk. If you would invest 923.00 in Limited Duration Fund on August 25, 2024 and sell it today you would lose (1.00) from holding Limited Duration Fund or give up 0.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Limited Duration Fund vs. Baron Health Care
Performance |
| Timeline |
| Limited Duration |
| Baron Health Care |
Limited Duration and Baron Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Limited Duration and Baron Health
The main advantage of trading using opposite Limited Duration and Baron Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Limited Duration position performs unexpectedly, Baron Health 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 Health will offset losses from the drop in Baron Health's long position.| Limited Duration vs. Baron Health Care | Limited Duration vs. Tekla Healthcare Opportunities | Limited Duration vs. Highland Longshort Healthcare | Limited Duration vs. Alphacentric Lifesci Healthcare |
| Baron Health vs. T Rowe Price | Baron Health vs. Nuveen All American Municipal | Baron Health vs. Morningstar Defensive Bond | Baron Health vs. Multisector Bond Sma |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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