Correlation Between Baron Health and Inflation Protection
Can any of the company-specific risk be diversified away by investing in both Baron Health and Inflation Protection 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 Inflation Protection 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 Inflation Protection Fund, you can compare the effects of market volatilities on Baron Health and Inflation Protection 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 Inflation Protection. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Health and Inflation Protection.
Diversification Opportunities for Baron Health and Inflation Protection
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Baron and INFLATION is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Baron Health Care and Inflation Protection Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inflation Protection 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 Inflation Protection. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inflation Protection has no effect on the direction of Baron Health i.e., Baron Health and Inflation Protection go up and down completely randomly.
Pair Corralation between Baron Health and Inflation Protection
Assuming the 90 days horizon Baron Health Care is expected to generate 4.63 times more return on investment than Inflation Protection. However, Baron Health is 4.63 times more volatile than Inflation Protection Fund. It trades about 0.08 of its potential returns per unit of risk. Inflation Protection Fund is currently generating about -0.07 per unit of risk. If you would invest 2,043 in Baron Health Care on September 4, 2024 and sell it today you would earn a total of 32.00 from holding Baron Health Care or generate 1.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 80.95% |
| Values | Daily Returns |
Baron Health Care vs. Inflation Protection Fund
Performance |
| Timeline |
| Baron Health Care |
| Inflation Protection |
Baron Health and Inflation Protection Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baron Health and Inflation Protection
The main advantage of trading using opposite Baron Health and Inflation Protection positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baron Health position performs unexpectedly, Inflation Protection 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 Inflation Protection will offset losses from the drop in Inflation Protection's long position.| Baron Health vs. Federated Pennsylvania Municipal | Baron Health vs. Franklin High Yield | Baron Health vs. Bbh Intermediate Municipal | Baron Health vs. Vanguard California Long Term |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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