Correlation Between Rational Defensive and Baillie Gifford

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

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

Diversification Opportunities for Rational Defensive and Baillie Gifford

0.75

Correlation Coefficient

Rational Defensive  Baillie Gifford

Poor diversification

The 3 months correlation between Rational and Baillie is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Baillie Gifford Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baillie Gifford Global and Rational Defensive 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 Rational Defensive Growth 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 Global has no effect on the direction of Rational Defensive i.e., Rational Defensive and Baillie Gifford go up and down completely randomly.

Pair Corralation between Rational Defensive and Baillie Gifford

Assuming the 90 days horizon Rational Defensive Growth is expected to under-perform the Baillie Gifford. In addition to that, Rational Defensive is 1.04 times more volatile than Baillie Gifford Global. It trades about -0.1 of its total potential returns per unit of risk. Baillie Gifford Global is currently generating about -0.01 per unit of volatility. If you would invest  1,626  in Baillie Gifford Global on December 30, 2024 and sell it today you would lose (23.00) from holding Baillie Gifford Global or give up 1.41% of portfolio value over 90 days.

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

Rational Defensive Growth  vs.  Baillie Gifford Global

Rational Defensive Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rational Defensive Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Baillie Gifford Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baillie Gifford Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, 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 Rational Defensive and Baillie Gifford

The main advantage of trading using opposite Rational Defensive and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rational Defensive 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 Rational Defensive Growth and Baillie Gifford Global 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.

Check out your portfolio center.

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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.