Correlation Between Baron Growth and Fidelity Mid-cap

Can any of the company-specific risk be diversified away by investing in both Baron Growth and Fidelity Mid-cap 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 Growth and Fidelity Mid-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Baron Growth Fund and Fidelity Mid Cap Stock, you can compare the effects of market volatilities on Baron Growth and Fidelity Mid-cap 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 Growth with a short position of Fidelity Mid-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Growth and Fidelity Mid-cap.

Diversification Opportunities for Baron Growth and Fidelity Mid-cap

0.55

Correlation Coefficient

Baron Growth  Fidelity Mid-cap

Very weak diversification

The 3 months correlation between Baron and Fidelity is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Baron Growth Fund and Fidelity Mid Cap Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Mid Cap and Baron Growth 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 Growth Fund are associated (or correlated) with Fidelity Mid-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Mid Cap has no effect on the direction of Baron Growth i.e., Baron Growth and Fidelity Mid-cap go up and down completely randomly.

Pair Corralation between Baron Growth and Fidelity Mid-cap

Assuming the 90 days horizon Baron Growth Fund is expected to under-perform the Fidelity Mid-cap. In addition to that, Baron Growth is 1.16 times more volatile than Fidelity Mid Cap Stock. It trades about -0.3 of its total potential returns per unit of risk. Fidelity Mid Cap Stock is currently generating about -0.13 per unit of volatility. If you would invest  4,328  in Fidelity Mid Cap Stock on February 5, 2024 and sell it today you would lose (95.00) from holding Fidelity Mid Cap Stock or give up 2.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Baron Growth Fund  vs.  Fidelity Mid Cap Stock

Baron Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baron Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Baron Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Mid Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Mid Cap Stock are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Fidelity Mid-cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Baron Growth and Fidelity Mid-cap

The main advantage of trading using opposite Baron Growth and Fidelity Mid-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baron Growth position performs unexpectedly, Fidelity Mid-cap 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 Fidelity Mid-cap will offset losses from the drop in Fidelity Mid-cap's long position.

The idea behind Baron Growth Fund and Fidelity Mid Cap Stock 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.