Correlation Between Baron International and Davis International
Can any of the company-specific risk be diversified away by investing in both Baron International and Davis 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 International and Davis International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baron International Growth and Davis International Fund, you can compare the effects of market volatilities on Baron International and Davis 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 International with a short position of Davis International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron International and Davis International.
Diversification Opportunities for Baron International and Davis International
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Baron and Davis is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Baron International Growth and Davis International Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis International and Baron International 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 International Growth are associated (or correlated) with Davis International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis International has no effect on the direction of Baron International i.e., Baron International and Davis International go up and down completely randomly.
Pair Corralation between Baron International and Davis International
Assuming the 90 days horizon Baron International is expected to generate 3.58 times less return on investment than Davis International. But when comparing it to its historical volatility, Baron International Growth is 1.55 times less risky than Davis International. It trades about 0.08 of its potential returns per unit of risk. Davis International Fund is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,234 in Davis International Fund on December 11, 2024 and sell it today you would earn a total of 140.00 from holding Davis International Fund or generate 11.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baron International Growth vs. Davis International Fund
Performance |
| Timeline |
| Baron International |
| Davis International |
Baron International and Davis International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baron International and Davis International
The main advantage of trading using opposite Baron International and Davis International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baron International position performs unexpectedly, Davis 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 Davis International will offset losses from the drop in Davis International's long position.| Baron International vs. Baron Emerging Markets | Baron International vs. Baron Fifth Avenue | Baron International vs. Baron Discovery Fund | Baron International vs. Baron Real Estate |
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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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