Correlation Between IShares MSCI and Baillie Gifford

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

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

Diversification Opportunities for IShares MSCI and Baillie Gifford

0.75

Correlation Coefficient

IShares MSCI  Baillie Gifford

Poor diversification

The 3 months correlation between IShares and Baillie is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Japan 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 IShares MSCI 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 iShares MSCI Japan 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 IShares MSCI i.e., IShares MSCI and Baillie Gifford go up and down completely randomly.

Pair Corralation between IShares MSCI and Baillie Gifford

Assuming the 90 days trading horizon IShares MSCI is expected to generate 3.98 times less return on investment than Baillie Gifford. But when comparing it to its historical volatility, iShares MSCI Japan is 2.28 times less risky than Baillie Gifford. It trades about 0.12 of its potential returns per unit of risk. Baillie Gifford Growth is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  21,400  in Baillie Gifford Growth on October 22, 2024 and sell it today you would earn a total of  5,300  from holding Baillie Gifford Growth or generate 24.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

iShares MSCI Japan  vs.  Baillie Gifford Growth

iShares MSCI Japan

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Japan are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares MSCI is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Baillie Gifford Growth

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Baillie Gifford Growth are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Baillie Gifford exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares MSCI and Baillie Gifford

The main advantage of trading using opposite IShares MSCI and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 iShares MSCI Japan 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.