Correlation Between Baron Health and Smallcap
Can any of the company-specific risk be diversified away by investing in both Baron Health and Smallcap 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 Smallcap 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 Smallcap Sp 600, you can compare the effects of market volatilities on Baron Health and Smallcap 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 Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Health and Smallcap.
Diversification Opportunities for Baron Health and Smallcap
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Baron and Smallcap is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Baron Health Care and Smallcap Sp 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap Sp 600 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 Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap Sp 600 has no effect on the direction of Baron Health i.e., Baron Health and Smallcap go up and down completely randomly.
Pair Corralation between Baron Health and Smallcap
Assuming the 90 days horizon Baron Health is expected to generate 4.9 times less return on investment than Smallcap. But when comparing it to its historical volatility, Baron Health Care is 1.61 times less risky than Smallcap. It trades about 0.03 of its potential returns per unit of risk. Smallcap Sp 600 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,729 in Smallcap Sp 600 on September 3, 2024 and sell it today you would earn a total of 427.00 from holding Smallcap Sp 600 or generate 15.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.6% |
| Values | Daily Returns |
Baron Health Care vs. Smallcap Sp 600
Performance |
| Timeline |
| Baron Health Care |
| Smallcap Sp 600 |
Baron Health and Smallcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baron Health and Smallcap
The main advantage of trading using opposite Baron Health and Smallcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baron Health position performs unexpectedly, Smallcap 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 Smallcap will offset losses from the drop in Smallcap's long position.| Baron Health vs. Vanguard Health Care | Baron Health vs. Vanguard Health Care | Baron Health vs. T Rowe Price | Baron Health vs. T Rowe Price |
| Smallcap vs. Wt Mutual Fund | Smallcap vs. Blackrock Exchange Portfolio | Smallcap vs. Janus Investment | Smallcap vs. Rbc Funds Trust |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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