Can any of the company-specific risk be diversified away by investing in both Baron Emerging and Baird Ultra 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 Emerging and Baird Ultra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baron Emerging Markets and Baird Ultra Short, you can compare the effects of market volatilities on Baron Emerging and Baird Ultra 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 Emerging with a short position of Baird Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Emerging and Baird Ultra.
Diversification Opportunities for Baron Emerging and Baird Ultra
The 3 months correlation between Baron and Baird is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Baron Emerging Markets and Baird Ultra Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Ultra Short and Baron Emerging 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 Emerging Markets are associated (or correlated) with Baird Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird Ultra Short has no effect on the direction of Baron Emerging i.e., Baron Emerging and Baird Ultra go up and down completely randomly.
Pair Corralation between Baron Emerging and Baird Ultra
Assuming the 90 days horizon Baron Emerging Markets is expected to generate 9.42 times more return on investment than Baird Ultra. However, Baron Emerging is 9.42 times more volatile than Baird Ultra Short. It trades about 0.07 of its potential returns per unit of risk. Baird Ultra Short is currently generating about 0.27 per unit of risk. If you would invest 1,412 in Baron Emerging Markets on March 6, 2024 and sell it today you would earn a total of 44.00 from holding Baron Emerging Markets or generate 3.12% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Baron Emerging Markets are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Baron Emerging is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Baird Ultra Short are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Baird Ultra is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.