Correlation Between Baillie Gifford and Us Equity

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

By analyzing existing cross correlation between Baillie Gifford Eafe and The Equity Growth, you can compare the effects of market volatilities on Baillie Gifford and Us Equity 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 Us Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baillie Gifford and Us Equity.

Diversification Opportunities for Baillie Gifford and Us Equity

-0.48

Correlation Coefficient

Baillie Gifford  Us Equity

Very good diversification

The 3 months correlation between Baillie and BGGKX is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Baillie Gifford Eafe and The Equity Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Growth 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 Eafe are associated (or correlated) with Us Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Growth has no effect on the direction of Baillie Gifford i.e., Baillie Gifford and Us Equity go up and down completely randomly.

Pair Corralation between Baillie Gifford and Us Equity

Assuming the 90 days horizon Baillie Gifford Eafe is expected to under-perform the Us Equity. But the mutual fund apears to be less risky and, when comparing its historical volatility, Baillie Gifford Eafe is 1.22 times less risky than Us Equity. The mutual fund trades about -0.04 of its potential returns per unit of risk. The The Equity Growth is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  2,221  in The Equity Growth on September 5, 2024 and sell it today you would earn a total of  578.00  from holding The Equity Growth or generate 26.02% return on investment over 90 days.

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

Baillie Gifford Eafe  vs.  The Equity Growth

Baillie Gifford Eafe

Risk-Adjusted Performance

0 of 100

Very Weak

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

Equity Growth

Risk-Adjusted Performance

23 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Equity Growth are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Us Equity showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baillie Gifford and Us Equity

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

The idea behind Baillie Gifford Eafe and The Equity Growth 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.