Correlation Between Midcap Growth and Baron Select

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

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

Diversification Opportunities for Midcap Growth and Baron Select

0.98

Correlation Coefficient

Midcap Growth  Baron Select

Almost no diversification

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

Pair Corralation between Midcap Growth and Baron Select

Assuming the 90 days horizon Midcap Growth is expected to generate 1.32 times less return on investment than Baron Select. But when comparing it to its historical volatility, Midcap Growth Fund is 1.13 times less risky than Baron Select. It trades about 0.26 of its potential returns per unit of risk. Baron Select Funds is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  1,238  in Baron Select Funds on May 4, 2025 and sell it today you would earn a total of  301.00  from holding Baron Select Funds or generate 24.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

Midcap Growth Fund  vs.  Baron Select Funds

Midcap Growth

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Midcap Growth Fund are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Midcap Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Baron Select Funds

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Select Funds are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baron Select showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Midcap Growth and Baron Select

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

The idea behind Midcap Growth Fund and Baron Select Funds 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.