Correlation Between Intermediate Government and Baillie Gifford

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

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

Diversification Opportunities for Intermediate Government and Baillie Gifford

0.09

Correlation Coefficient

Intermediate Government  Baillie Gifford

Significant diversification

The 3 months correlation between Intermediate and Baillie is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Government Bond 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 Intermediate Government 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 Intermediate Government Bond 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 Intermediate Government i.e., Intermediate Government and Baillie Gifford go up and down completely randomly.

Pair Corralation between Intermediate Government and Baillie Gifford

Assuming the 90 days horizon Intermediate Government is expected to generate 20.16 times less return on investment than Baillie Gifford. But when comparing it to its historical volatility, Intermediate Government Bond is 20.32 times less risky than Baillie Gifford. It trades about 0.07 of its potential returns per unit of risk. Baillie Gifford Discovery is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  540.00  in Baillie Gifford Discovery on September 12, 2024 and sell it today you would earn a total of  32.00  from holding Baillie Gifford Discovery or generate 5.93% return on investment over 90 days.

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

Intermediate Government Bond  vs.  Baillie Gifford Discovery

Intermediate Government

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Intermediate Government Bond are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Intermediate Government 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

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Baillie Gifford Discovery are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Baillie Gifford may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Intermediate Government and Baillie Gifford

The main advantage of trading using opposite Intermediate Government and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate Government 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 Intermediate Government Bond 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..