Correlation Between Icon Natural and Baillie Gifford

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

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

Diversification Opportunities for Icon Natural and Baillie Gifford

0.16

Correlation Coefficient

Icon Natural  Baillie Gifford

Average diversification

The 3 months correlation between Icon and Baillie is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Icon Natural Resources and Baillie Gifford China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baillie Gifford China and Icon Natural 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 Icon Natural Resources are associated (or correlated) with Baillie Gifford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baillie Gifford China has no effect on the direction of Icon Natural i.e., Icon Natural and Baillie Gifford go up and down completely randomly.

Pair Corralation between Icon Natural and Baillie Gifford

Assuming the 90 days horizon Icon Natural is expected to generate 2.83 times less return on investment than Baillie Gifford. But when comparing it to its historical volatility, Icon Natural Resources is 2.39 times less risky than Baillie Gifford. It trades about 0.15 of its potential returns per unit of risk. Baillie Gifford China is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  700.00  in Baillie Gifford China on September 12, 2024 and sell it today you would earn a total of  202.00  from holding Baillie Gifford China or generate 28.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Icon Natural Resources  vs.  Baillie Gifford China

Icon Natural Resources

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Natural Resources are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Icon Natural may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Baillie Gifford China

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baillie Gifford China are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baillie Gifford showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Icon Natural and Baillie Gifford

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

The idea behind Icon Natural Resources and Baillie Gifford China 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.