Correlation Between Baron Health and Locorr Longshort
Can any of the company-specific risk be diversified away by investing in both Baron Health and Locorr Longshort 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 Health and Locorr Longshort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baron Health Care and Locorr Longshort Modities, you can compare the effects of market volatilities on Baron Health and Locorr Longshort 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 Health with a short position of Locorr Longshort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Health and Locorr Longshort.
Diversification Opportunities for Baron Health and Locorr Longshort
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Baron and Locorr is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Baron Health Care and Locorr Longshort Modities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Locorr Longshort Modities and Baron Health 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 Health Care are associated (or correlated) with Locorr Longshort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Locorr Longshort Modities has no effect on the direction of Baron Health i.e., Baron Health and Locorr Longshort go up and down completely randomly.
Pair Corralation between Baron Health and Locorr Longshort
Assuming the 90 days horizon Baron Health Care is expected to generate 2.91 times more return on investment than Locorr Longshort. However, Baron Health is 2.91 times more volatile than Locorr Longshort Modities. It trades about 0.04 of its potential returns per unit of risk. Locorr Longshort Modities is currently generating about -0.07 per unit of risk. If you would invest 1,826 in Baron Health Care on September 12, 2024 and sell it today you would earn a total of 201.00 from holding Baron Health Care or generate 11.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baron Health Care vs. Locorr Longshort Modities
Performance |
| Timeline |
| Baron Health Care |
| Locorr Longshort Modities |
Baron Health and Locorr Longshort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baron Health and Locorr Longshort
The main advantage of trading using opposite Baron Health and Locorr Longshort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baron Health position performs unexpectedly, Locorr Longshort 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 Locorr Longshort will offset losses from the drop in Locorr Longshort's long position.| Baron Health vs. Adams Natural Resources | Baron Health vs. Oil Gas Ultrasector | Baron Health vs. Dreyfus Natural Resources | Baron Health vs. Alpsalerian Energy Infrastructure |
| Locorr Longshort vs. Prudential Health Sciences | Locorr Longshort vs. Alger Health Sciences | Locorr Longshort vs. Eventide Healthcare Life | Locorr Longshort vs. Baron Health Care |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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