Correlation Between Baron Health and Touchstone Mid
Can any of the company-specific risk be diversified away by investing in both Baron Health and Touchstone Mid 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 Touchstone Mid 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 Touchstone Mid Cap, you can compare the effects of market volatilities on Baron Health and Touchstone Mid 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 Touchstone Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Health and Touchstone Mid.
Diversification Opportunities for Baron Health and Touchstone Mid
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Baron and Touchstone is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Baron Health Care and Touchstone Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Mid Cap 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 Touchstone Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Mid Cap has no effect on the direction of Baron Health i.e., Baron Health and Touchstone Mid go up and down completely randomly.
Pair Corralation between Baron Health and Touchstone Mid
Assuming the 90 days horizon Baron Health is expected to generate 2.96 times less return on investment than Touchstone Mid. But when comparing it to its historical volatility, Baron Health Care is 1.15 times less risky than Touchstone Mid. It trades about 0.03 of its potential returns per unit of risk. Touchstone Mid Cap is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,086 in Touchstone Mid Cap on September 12, 2024 and sell it today you would earn a total of 1,954 from holding Touchstone Mid Cap or generate 47.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baron Health Care vs. Touchstone Mid Cap
Performance |
| Timeline |
| Baron Health Care |
| Touchstone Mid Cap |
Baron Health and Touchstone Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baron Health and Touchstone Mid
The main advantage of trading using opposite Baron Health and Touchstone Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baron Health position performs unexpectedly, Touchstone Mid 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 Touchstone Mid will offset losses from the drop in Touchstone Mid'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 |
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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