Correlation Between M Large and Baron Emerging
Can any of the company-specific risk be diversified away by investing in both M Large and Baron Emerging 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 M Large and Baron Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between M Large Cap and Baron Emerging Markets, you can compare the effects of market volatilities on M Large and Baron Emerging 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 M Large with a short position of Baron Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of M Large and Baron Emerging.
Diversification Opportunities for M Large and Baron Emerging
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between MTCGX and Baron is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding M Large Cap and Baron Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Emerging Markets and M Large 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 M Large Cap are associated (or correlated) with Baron Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Emerging Markets has no effect on the direction of M Large i.e., M Large and Baron Emerging go up and down completely randomly.
Pair Corralation between M Large and Baron Emerging
Assuming the 90 days horizon M Large Cap is expected to generate 1.37 times more return on investment than Baron Emerging. However, M Large is 1.37 times more volatile than Baron Emerging Markets. It trades about 0.08 of its potential returns per unit of risk. Baron Emerging Markets is currently generating about 0.05 per unit of risk. If you would invest 2,430 in M Large Cap on September 12, 2024 and sell it today you would earn a total of 1,299 from holding M Large Cap or generate 53.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
M Large Cap vs. Baron Emerging Markets
Performance |
| Timeline |
| M Large Cap |
| Baron Emerging Markets |
M Large and Baron Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with M Large and Baron Emerging
The main advantage of trading using opposite M Large and Baron Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M Large position performs unexpectedly, Baron Emerging 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 Emerging will offset losses from the drop in Baron Emerging's long position.| M Large vs. Vanguard Total Stock | M Large vs. Vanguard 500 Index | M Large vs. Vanguard Total Stock | M Large vs. Vanguard Total Stock |
| Baron Emerging vs. Jhancock Diversified Macro | Baron Emerging vs. Western Asset Diversified | Baron Emerging vs. Small Cap Stock | Baron Emerging vs. Adams Diversified Equity |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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