Correlation Between Baron Health and Health Care
Can any of the company-specific risk be diversified away by investing in both Baron Health and Health Care 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 Health Care 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 Health Care Fund, you can compare the effects of market volatilities on Baron Health and Health Care 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 Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Health and Health Care.
Diversification Opportunities for Baron Health and Health Care
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Baron and HEALTH is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Baron Health Care and Health Care Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Fund 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 Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Fund has no effect on the direction of Baron Health i.e., Baron Health and Health Care go up and down completely randomly.
Pair Corralation between Baron Health and Health Care
Assuming the 90 days horizon Baron Health Care is expected to generate 1.16 times more return on investment than Health Care. However, Baron Health is 1.16 times more volatile than Health Care Fund. It trades about -0.04 of its potential returns per unit of risk. Health Care Fund is currently generating about -0.09 per unit of risk. If you would invest 2,121 in Baron Health Care on September 2, 2024 and sell it today you would lose (50.00) from holding Baron Health Care or give up 2.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baron Health Care vs. Health Care Fund
Performance |
| Timeline |
| Baron Health Care |
| Health Care Fund |
Baron Health and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baron Health and Health Care
The main advantage of trading using opposite Baron Health and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baron Health position performs unexpectedly, Health Care 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 Health Care will offset losses from the drop in Health Care's long position.| Baron Health vs. Lgm Risk Managed | Baron Health vs. Western Asset High | Baron Health vs. Pace High Yield | Baron Health vs. Pioneer High Yield |
| Health Care vs. Banking Fund Class | Health Care vs. Basic Materials Fund | Health Care vs. Biotechnology Fund Class | Health Care vs. Government Long Bond |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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