Correlation Between Baron Select and Baron Small

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Can any of the company-specific risk be diversified away by investing in both Baron Select and Baron Small 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 Select and Baron Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baron Select Funds and Baron Small Cap, you can compare the effects of market volatilities on Baron Select and Baron Small 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 Select with a short position of Baron Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Select and Baron Small.

Diversification Opportunities for Baron Select and Baron Small

0.92
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Baron and Baron is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Baron Select Funds and Baron Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Small Cap and Baron Select 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 Select Funds are associated (or correlated) with Baron Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Small Cap has no effect on the direction of Baron Select i.e., Baron Select and Baron Small go up and down completely randomly.

Pair Corralation between Baron Select and Baron Small

Assuming the 90 days horizon Baron Select Funds is expected to generate 1.25 times more return on investment than Baron Small. However, Baron Select is 1.25 times more volatile than Baron Small Cap. It trades about 0.13 of its potential returns per unit of risk. Baron Small Cap is currently generating about 0.09 per unit of risk. If you would invest  640.00  in Baron Select Funds on August 26, 2024 and sell it today you would earn a total of  665.00  from holding Baron Select Funds or generate 103.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Baron Select Funds  vs.  Baron Small Cap

 Performance 
       Timeline  
Baron Select Funds 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Baron Select Funds are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baron Select showed solid returns over the last few months and may actually be approaching a breakup point.
Baron Small Cap 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Baron Small Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Baron Small may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Baron Select and Baron Small Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Baron Select and Baron Small

The main advantage of trading using opposite Baron Select and Baron Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baron Select position performs unexpectedly, Baron Small 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 Small will offset losses from the drop in Baron Small's long position.
The idea behind Baron Select Funds and Baron Small Cap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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