Correlation Between Baron Opportunity and Plumb Balanced
Can any of the company-specific risk be diversified away by investing in both Baron Opportunity and Plumb Balanced 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 Opportunity and Plumb Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baron Opportunity Fund and Plumb Balanced Fund, you can compare the effects of market volatilities on Baron Opportunity and Plumb Balanced 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 Opportunity with a short position of Plumb Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Opportunity and Plumb Balanced.
Diversification Opportunities for Baron Opportunity and Plumb Balanced
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Baron and Plumb is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Baron Opportunity Fund and Plumb Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plumb Balanced and Baron Opportunity 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 Opportunity Fund are associated (or correlated) with Plumb Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plumb Balanced has no effect on the direction of Baron Opportunity i.e., Baron Opportunity and Plumb Balanced go up and down completely randomly.
Pair Corralation between Baron Opportunity and Plumb Balanced
Assuming the 90 days horizon Baron Opportunity Fund is expected to generate 1.99 times more return on investment than Plumb Balanced. However, Baron Opportunity is 1.99 times more volatile than Plumb Balanced Fund. It trades about 0.12 of its potential returns per unit of risk. Plumb Balanced Fund is currently generating about 0.14 per unit of risk. If you would invest 3,390 in Baron Opportunity Fund on September 3, 2024 and sell it today you would earn a total of 1,519 from holding Baron Opportunity Fund or generate 44.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baron Opportunity Fund vs. Plumb Balanced Fund
Performance |
| Timeline |
| Baron Opportunity |
| Plumb Balanced |
Baron Opportunity and Plumb Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baron Opportunity and Plumb Balanced
The main advantage of trading using opposite Baron Opportunity and Plumb Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baron Opportunity position performs unexpectedly, Plumb Balanced 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 Plumb Balanced will offset losses from the drop in Plumb Balanced's long position.| Baron Opportunity vs. Baron Partners Fund | Baron Opportunity vs. Baron Global Advantage | Baron Opportunity vs. Baron Fifth Avenue | Baron Opportunity vs. Baron Focused Growth |
| Plumb Balanced vs. American Funds American | Plumb Balanced vs. American Funds American | Plumb Balanced vs. American Balanced | Plumb Balanced vs. American Balanced Fund |
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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