Correlation Between Baron Real and Baron Discovery
Can any of the company-specific risk be diversified away by investing in both Baron Real and Baron Discovery 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 Real and Baron Discovery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baron Real Estate and Baron Discovery Fund, you can compare the effects of market volatilities on Baron Real and Baron Discovery 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 Real with a short position of Baron Discovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Real and Baron Discovery.
Diversification Opportunities for Baron Real and Baron Discovery
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Baron and Baron is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Baron Real Estate and Baron Discovery Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Discovery and Baron Real 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 Real Estate are associated (or correlated) with Baron Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Discovery has no effect on the direction of Baron Real i.e., Baron Real and Baron Discovery go up and down completely randomly.
Pair Corralation between Baron Real and Baron Discovery
Assuming the 90 days horizon Baron Real is expected to generate 2.11 times less return on investment than Baron Discovery. But when comparing it to its historical volatility, Baron Real Estate is 1.26 times less risky than Baron Discovery. It trades about 0.27 of its potential returns per unit of risk. Baron Discovery Fund is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest 3,056 in Baron Discovery Fund on September 1, 2024 and sell it today you would earn a total of 442.00 from holding Baron Discovery Fund or generate 14.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Baron Real Estate vs. Baron Discovery Fund
Performance |
| Timeline |
| Baron Real Estate |
| Baron Discovery |
Baron Real and Baron Discovery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baron Real and Baron Discovery
The main advantage of trading using opposite Baron Real and Baron Discovery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baron Real position performs unexpectedly, Baron Discovery 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 Baron Discovery will offset losses from the drop in Baron Discovery's long position.| Baron Real vs. Baron Opportunity Fund | Baron Real vs. Baron Global Advantage | Baron Real vs. Baron Partners Fund | Baron Real vs. Baron Focused Growth |
| Baron Discovery vs. Baron Partners Fund | Baron Discovery vs. Baron Global Advantage | Baron Discovery vs. Baron Opportunity Fund | Baron Discovery vs. Baron Fifth Avenue |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |