Correlation Between Baillie Gifford and Federated Premier

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

By analyzing existing cross correlation between Baillie Gifford China and Federated Premier Municipal, you can compare the effects of market volatilities on Baillie Gifford and Federated Premier 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 Federated Premier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baillie Gifford and Federated Premier.

Diversification Opportunities for Baillie Gifford and Federated Premier

-0.74

Correlation Coefficient

Baillie Gifford  Federated Premier

Pay attention - limited upside

The 3 months correlation between Baillie and Federated is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Baillie Gifford China and Federated Premier Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Premier 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 China are associated (or correlated) with Federated Premier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Premier has no effect on the direction of Baillie Gifford i.e., Baillie Gifford and Federated Premier go up and down completely randomly.

Pair Corralation between Baillie Gifford and Federated Premier

Assuming the 90 days horizon Baillie Gifford China is expected to under-perform the Federated Premier. In addition to that, Baillie Gifford is 2.26 times more volatile than Federated Premier Municipal. It trades about -0.03 of its total potential returns per unit of risk. Federated Premier Municipal is currently generating about 0.04 per unit of volatility. If you would invest  974.00  in Federated Premier Municipal on September 23, 2024 and sell it today you would earn a total of  121.00  from holding Federated Premier Municipal or generate 12.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.59%
Values	Daily Returns

Baillie Gifford China  vs.  Federated Premier Municipal

Baillie Gifford China

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Baillie Gifford China has generated negative risk-adjusted returns adding no value to fund investors. 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.

Federated Premier

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Premier Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest unfluctuating performance, the Fund's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the fund investors.

Pair Trading with Baillie Gifford and Federated Premier

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

The idea behind Baillie Gifford China and Federated Premier Municipal 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.