Correlation Between Baron Health and Transamerica International
Can any of the company-specific risk be diversified away by investing in both Baron Health and Transamerica International 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 Transamerica International 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 Transamerica International Equity, you can compare the effects of market volatilities on Baron Health and Transamerica International 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 Transamerica International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Health and Transamerica International.
Diversification Opportunities for Baron Health and Transamerica International
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Baron and Transamerica is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Baron Health Care and Transamerica International Equ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica International 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 Transamerica International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica International has no effect on the direction of Baron Health i.e., Baron Health and Transamerica International go up and down completely randomly.
Pair Corralation between Baron Health and Transamerica International
Assuming the 90 days horizon Baron Health is expected to generate 2.09 times less return on investment than Transamerica International. But when comparing it to its historical volatility, Baron Health Care is 1.02 times less risky than Transamerica International. It trades about 0.02 of its potential returns per unit of risk. Transamerica International Equity is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,988 in Transamerica International Equity on September 1, 2024 and sell it today you would earn a total of 90.00 from holding Transamerica International Equity or generate 4.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.47% |
| Values | Daily Returns |
Baron Health Care vs. Transamerica International Equ
Performance |
| Timeline |
| Baron Health Care |
| Transamerica International |
Baron Health and Transamerica International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baron Health and Transamerica International
The main advantage of trading using opposite Baron Health and Transamerica International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baron Health position performs unexpectedly, Transamerica International 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 Transamerica International will offset losses from the drop in Transamerica International's long position.| Baron Health vs. California High Yield Municipal | Baron Health vs. Franklin High Income | Baron Health vs. T Rowe Price | Baron Health vs. Needham Aggressive Growth |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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