Correlation Between Baillie Gifford and International Developed

Can any of the company-specific risk be diversified away by investing in both Baillie Gifford and International Developed 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 Baillie Gifford and International Developed into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Baillie Gifford Health and International Developed Markets, you can compare the effects of market volatilities on Baillie Gifford and International Developed 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 Baillie Gifford with a short position of International Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baillie Gifford and International Developed.

Diversification Opportunities for Baillie Gifford and International Developed

0.72

Correlation Coefficient

Baillie Gifford  International Developed

Poor diversification

The 3 months correlation between Baillie and International is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Baillie Gifford Health and International Developed Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Developed and Baillie Gifford 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 Baillie Gifford Health are associated (or correlated) with International Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Developed has no effect on the direction of Baillie Gifford i.e., Baillie Gifford and International Developed go up and down completely randomly.

Pair Corralation between Baillie Gifford and International Developed

Assuming the 90 days horizon Baillie Gifford Health is expected to under-perform the International Developed. In addition to that, Baillie Gifford is 2.3 times more volatile than International Developed Markets. It trades about -0.01 of its total potential returns per unit of risk. International Developed Markets is currently generating about -0.02 per unit of volatility. If you would invest  4,482  in International Developed Markets on September 12, 2024 and sell it today you would lose (38.00) from holding International Developed Markets or give up 0.85% of portfolio value over 90 days.

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

Baillie Gifford Health  vs.  International Developed Market

Baillie Gifford Health

Risk-Adjusted Performance

0 of 100

Very Weak

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

International Developed

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Baillie Gifford and International Developed

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

The idea behind Baillie Gifford Health and International Developed Markets 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.