Correlation Between Baillie Gifford and Long Term

Can any of the company-specific risk be diversified away by investing in both Baillie Gifford and Long Term 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 Long Term 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 Long Term, you can compare the effects of market volatilities on Baillie Gifford and Long Term 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 Long Term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baillie Gifford and Long Term.

Diversification Opportunities for Baillie Gifford and Long Term

0.58

Correlation Coefficient

Baillie Gifford  Long Term

Very weak diversification

The 3 months correlation between Baillie and Long is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Baillie Gifford Eafe and The Long Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Long Term 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 Long Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Long Term has no effect on the direction of Baillie Gifford i.e., Baillie Gifford and Long Term go up and down completely randomly.

Pair Corralation between Baillie Gifford and Long Term

Assuming the 90 days horizon Baillie Gifford is expected to generate 2.22 times less return on investment than Long Term. But when comparing it to its historical volatility, Baillie Gifford Eafe is 1.17 times less risky than Long Term. It trades about 0.11 of its potential returns per unit of risk. The Long Term is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,923  in The Long Term on September 11, 2024 and sell it today you would earn a total of  610.00  from holding The Long Term or generate 20.87% return on investment over 90 days.

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

Baillie Gifford Eafe  vs.  The Long Term

Baillie Gifford Eafe

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baillie Gifford Eafe are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baillie Gifford may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Long Term

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Long Term are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Long Term showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baillie Gifford and Long Term

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

The idea behind Baillie Gifford Eafe and The Long Term 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.