Correlation Between Baillie Gifford and Optimum Small

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

Diversification Opportunities for Baillie Gifford and Optimum Small

-0.33

Correlation Coefficient

Baillie Gifford  Optimum Small

Very good diversification

The 3 months correlation between Baillie and Optimum is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Baillie Gifford Health and Optimum Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimum Small Mid 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 Optimum Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimum Small Mid has no effect on the direction of Baillie Gifford i.e., Baillie Gifford and Optimum Small go up and down completely randomly.

Pair Corralation between Baillie Gifford and Optimum Small

Assuming the 90 days horizon Baillie Gifford Health is expected to under-perform the Optimum Small. In addition to that, Baillie Gifford is 1.18 times more volatile than Optimum Small Mid Cap. It trades about -0.03 of its total potential returns per unit of risk. Optimum Small Mid Cap is currently generating about 0.04 per unit of volatility. If you would invest  961.00  in Optimum Small Mid Cap on October 4, 2024 and sell it today you would earn a total of  214.00  from holding Optimum Small Mid Cap or generate 22.27% 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.  Optimum Small Mid Cap

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.

Optimum Small Mid

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Optimum Small Mid Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Optimum Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Baillie Gifford and Optimum Small

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

The idea behind Baillie Gifford Health and Optimum Small Mid Cap 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.