Correlation Between Downing Strategic and Baillie Gifford

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

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

Diversification Opportunities for Downing Strategic and Baillie Gifford

0.49

Correlation Coefficient

Downing Strategic  Baillie Gifford

Very weak diversification

The 3 months correlation between Downing and Baillie is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Downing Strategic Micro Cap and Baillie Gifford Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baillie Gifford Growth and Downing Strategic 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 Downing Strategic Micro Cap 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 Growth has no effect on the direction of Downing Strategic i.e., Downing Strategic and Baillie Gifford go up and down completely randomly.

Pair Corralation between Downing Strategic and Baillie Gifford

Assuming the 90 days trading horizon Downing Strategic Micro Cap is expected to generate 3.77 times more return on investment than Baillie Gifford. However, Downing Strategic is 3.77 times more volatile than Baillie Gifford Growth. It trades about -0.01 of its potential returns per unit of risk. Baillie Gifford Growth is currently generating about -0.09 per unit of risk. If you would invest  470.00  in Downing Strategic Micro Cap on December 2, 2024 and sell it today you would lose (65.00) from holding Downing Strategic Micro Cap or give up 13.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	92.06%
Values	Daily Returns

Downing Strategic Micro Cap  vs.  Baillie Gifford Growth

Downing Strategic Micro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Downing Strategic Micro Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Downing Strategic is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Baillie Gifford Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baillie Gifford Growth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Downing Strategic and Baillie Gifford

The main advantage of trading using opposite Downing Strategic and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Downing Strategic 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 Downing Strategic Micro Cap and Baillie Gifford Growth 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.