Correlation Between Baron Emerging and Emerging Markets

Can any of the company-specific risk be diversified away by investing in both Baron Emerging and Emerging Markets 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 Emerging Markets 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 Emerging Markets Portfolio, you can compare the effects of market volatilities on Baron Emerging and Emerging Markets 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 Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Emerging and Emerging Markets.

Diversification Opportunities for Baron Emerging and Emerging Markets

0.98

Correlation Coefficient

Baron Emerging  Emerging Markets

Almost no diversification

The 3 months correlation between Baron and Emerging is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Baron Emerging Markets and Emerging Markets Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Por 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 Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets Por has no effect on the direction of Baron Emerging i.e., Baron Emerging and Emerging Markets go up and down completely randomly.

Pair Corralation between Baron Emerging and Emerging Markets

Assuming the 90 days horizon Baron Emerging Markets is expected to generate 1.0 times more return on investment than Emerging Markets. However, Baron Emerging is 1.0 times more volatile than Emerging Markets Portfolio. It trades about 0.03 of its potential returns per unit of risk. Emerging Markets Portfolio is currently generating about 0.0 per unit of risk. If you would invest  1,439  in Baron Emerging Markets on January 29, 2024 and sell it today you would earn a total of  7.00  from holding Baron Emerging Markets or generate 0.49% return on investment over 90 days.

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

Baron Emerging Markets  vs.  Emerging Markets Portfolio

Baron Emerging Markets

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Emerging Markets are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Baron Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Emerging Markets Por

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerging Markets Portfolio are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Emerging Markets 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 Emerging and Emerging Markets

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

The idea behind Baron Emerging Markets and Emerging Markets Portfolio 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.