Correlation Between Real Estate and Baron Opportunity

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

By analyzing existing cross correlation between Real Estate Fund and Baron Opportunity Fund, you can compare the effects of market volatilities on Real Estate 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 Real Estate with a short position of Baron Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Estate and Baron Opportunity.

Diversification Opportunities for Real Estate and Baron Opportunity

0.71

Correlation Coefficient

Real Estate  Baron Opportunity

Poor diversification

The 3 months correlation between Real and Baron is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Real Estate 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 Real Estate 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 Real Estate 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 Real Estate i.e., Real Estate and Baron Opportunity go up and down completely randomly.

Pair Corralation between Real Estate and Baron Opportunity

Assuming the 90 days horizon Real Estate Fund is expected to under-perform the Baron Opportunity. But the mutual fund apears to be less risky and, when comparing its historical volatility, Real Estate Fund is 1.19 times less risky than Baron Opportunity. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Baron Opportunity Fund is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  4,057  in Baron Opportunity Fund on March 3, 2024 and sell it today you would lose (136.00) from holding Baron Opportunity Fund or give up 3.35% of portfolio value over 90 days.

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

Real Estate Fund  vs.  Baron Opportunity Fund

Real Estate Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Baron Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Real Estate and Baron Opportunity

The main advantage of trading using opposite Real Estate and Baron Opportunity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Estate 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.

The idea behind Real Estate Fund and Baron Opportunity Fund 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.

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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.