Correlation Between Baron Wealthbuilder and Baron Opportunity
Can any of the company-specific risk be diversified away by investing in both Baron Wealthbuilder and Baron Opportunity 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 Wealthbuilder and Baron Opportunity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baron Wealthbuilder Fund and Baron Opportunity Fund, you can compare the effects of market volatilities on Baron Wealthbuilder and Baron Opportunity 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 Wealthbuilder with a short position of Baron Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Wealthbuilder and Baron Opportunity.
Diversification Opportunities for Baron Wealthbuilder and Baron Opportunity
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 Wealthbuilder Fund and Baron Opportunity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Opportunity and Baron Wealthbuilder 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 Wealthbuilder Fund are associated (or correlated) with Baron Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Opportunity has no effect on the direction of Baron Wealthbuilder i.e., Baron Wealthbuilder and Baron Opportunity go up and down completely randomly.
Pair Corralation between Baron Wealthbuilder and Baron Opportunity
Assuming the 90 days horizon Baron Wealthbuilder is expected to generate 1.34 times less return on investment than Baron Opportunity. But when comparing it to its historical volatility, Baron Wealthbuilder Fund is 1.2 times less risky than Baron Opportunity. It trades about 0.18 of its potential returns per unit of risk. Baron Opportunity Fund is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 4,708 in Baron Opportunity Fund on August 29, 2024 and sell it today you would earn a total of 466.00 from holding Baron Opportunity Fund or generate 9.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.67% |
| Values | Daily Returns |
Baron Wealthbuilder Fund vs. Baron Opportunity Fund
Performance |
| Timeline |
| Baron Wealthbuilder |
| Baron Opportunity |
Baron Wealthbuilder and Baron Opportunity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baron Wealthbuilder and Baron Opportunity
The main advantage of trading using opposite Baron Wealthbuilder and Baron Opportunity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baron Wealthbuilder position performs unexpectedly, Baron Opportunity 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 Opportunity will offset losses from the drop in Baron Opportunity's long position.| Baron Wealthbuilder vs. Baron Discovery Fund | Baron Wealthbuilder vs. Baron Opportunity Fund | Baron Wealthbuilder vs. Baron Global Advantage | Baron Wealthbuilder vs. Baron Focused Growth |
| Baron Opportunity vs. Baron Partners Fund | Baron Opportunity vs. Baron Global Advantage | Baron Opportunity vs. Baron Focused Growth | Baron Opportunity vs. Baron Discovery 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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