Correlation Between Dunham Emerging and Baillie Gifford

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

By analyzing existing cross correlation between Dunham Emerging Markets and Baillie Gifford Discovery, you can compare the effects of market volatilities on Dunham Emerging and Baillie Gifford 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 Dunham Emerging with a short position of Baillie Gifford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dunham Emerging and Baillie Gifford.

Diversification Opportunities for Dunham Emerging and Baillie Gifford

-0.52

Correlation Coefficient

Dunham Emerging  Baillie Gifford

Excellent diversification

The 3 months correlation between Dunham and Baillie is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Emerging Markets and Baillie Gifford Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baillie Gifford Discovery and Dunham Emerging 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 Dunham Emerging Markets are associated (or correlated) with Baillie Gifford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baillie Gifford Discovery has no effect on the direction of Dunham Emerging i.e., Dunham Emerging and Baillie Gifford go up and down completely randomly.

Pair Corralation between Dunham Emerging and Baillie Gifford

Assuming the 90 days horizon Dunham Emerging is expected to generate 3.87 times less return on investment than Baillie Gifford. But when comparing it to its historical volatility, Dunham Emerging Markets is 1.7 times less risky than Baillie Gifford. It trades about 0.01 of its potential returns per unit of risk. Baillie Gifford Discovery is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  500.00  in Baillie Gifford Discovery on October 10, 2024 and sell it today you would earn a total of  72.00  from holding Baillie Gifford Discovery or generate 14.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.98%
Values	Daily Returns

Dunham Emerging Markets  vs.  Baillie Gifford Discovery

Dunham Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

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

Baillie Gifford Discovery

Risk-Adjusted Performance

0 of 100

Insignificant

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

Pair Trading with Dunham Emerging and Baillie Gifford

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

The idea behind Dunham Emerging Markets and Baillie Gifford Discovery 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.