Correlation Between Baron Growth and Ariel Fund
Can any of the company-specific risk be diversified away by investing in both Baron Growth and Ariel Fund 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 Baron Growth and Ariel Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baron Growth Fund and Ariel Fund Investor, you can compare the effects of market volatilities on Baron Growth and Ariel Fund 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 Baron Growth with a short position of Ariel Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Growth and Ariel Fund.
Diversification Opportunities for Baron Growth and Ariel Fund
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Baron and Ariel is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Baron Growth Fund and Ariel Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ariel Fund Investor and Baron Growth 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 Baron Growth Fund are associated (or correlated) with Ariel Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ariel Fund Investor has no effect on the direction of Baron Growth i.e., Baron Growth and Ariel Fund go up and down completely randomly.
Pair Corralation between Baron Growth and Ariel Fund
Assuming the 90 days horizon Baron Growth is expected to generate 1.68 times less return on investment than Ariel Fund. But when comparing it to its historical volatility, Baron Growth Fund is 1.37 times less risky than Ariel Fund. It trades about 0.08 of its potential returns per unit of risk. Ariel Fund Investor is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 6,141 in Ariel Fund Investor on September 1, 2024 and sell it today you would earn a total of 2,096 from holding Ariel Fund Investor or generate 34.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baron Growth Fund vs. Ariel Fund Investor
Performance |
| Timeline |
| Baron Growth |
| Ariel Fund Investor |
Baron Growth and Ariel Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baron Growth and Ariel Fund
The main advantage of trading using opposite Baron Growth and Ariel Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baron Growth position performs unexpectedly, Ariel Fund 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 Ariel Fund will offset losses from the drop in Ariel Fund's long position.| Baron Growth vs. Baron Asset Fund | Baron Growth vs. Baron Small Cap | Baron Growth vs. Baron Partners Fund | Baron Growth vs. Fidelity Diversified International |
| Ariel Fund vs. Ariel Fund Institutional | Ariel Fund vs. Ariel Focus Fund | Ariel Fund vs. Ariel Global Fund | Ariel Fund vs. Ariel Global Fund |
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.
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