Correlation Between Baillie Gifford and Internet Ultrasector

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

Diversification Opportunities for Baillie Gifford and Internet Ultrasector

-0.05

Correlation Coefficient

Baillie Gifford  Internet Ultrasector

Good diversification

The 3 months correlation between Baillie and Internet is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Baillie Gifford Health and Internet Ultrasector Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Internet Ultrasector 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 Internet Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Internet Ultrasector has no effect on the direction of Baillie Gifford i.e., Baillie Gifford and Internet Ultrasector go up and down completely randomly.

Pair Corralation between Baillie Gifford and Internet Ultrasector

Assuming the 90 days horizon Baillie Gifford Health is expected to under-perform the Internet Ultrasector. But the mutual fund apears to be less risky and, when comparing its historical volatility, Baillie Gifford Health is 1.18 times less risky than Internet Ultrasector. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Internet Ultrasector Profund is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  4,787  in Internet Ultrasector Profund on October 26, 2024 and sell it today you would earn a total of  1,285  from holding Internet Ultrasector Profund or generate 26.84% return on investment over 90 days.

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

Baillie Gifford Health  vs.  Internet Ultrasector Profund

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.

Internet Ultrasector

Risk-Adjusted Performance

17 of 100

Solid

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

Pair Trading with Baillie Gifford and Internet Ultrasector

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

The idea behind Baillie Gifford Health and Internet Ultrasector Profund 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.