Correlation Between Global Technology and Baillie Gifford

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

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

Diversification Opportunities for Global Technology and Baillie Gifford

0.5

Correlation Coefficient

Global Technology  Baillie Gifford

Very weak diversification

The 3 months correlation between Global and Baillie is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Global Technology Portfolio and Baillie Gifford Eafe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baillie Gifford Eafe and Global Technology 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 Global Technology Portfolio 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 Eafe has no effect on the direction of Global Technology i.e., Global Technology and Baillie Gifford go up and down completely randomly.

Pair Corralation between Global Technology and Baillie Gifford

Assuming the 90 days horizon Global Technology Portfolio is expected to under-perform the Baillie Gifford. But the mutual fund apears to be less risky and, when comparing its historical volatility, Global Technology Portfolio is 1.1 times less risky than Baillie Gifford. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Baillie Gifford Eafe is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,433  in Baillie Gifford Eafe on December 4, 2024 and sell it today you would lose (96.00) from holding Baillie Gifford Eafe or give up 6.7% of portfolio value over 90 days.

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

Global Technology Portfolio  vs.  Baillie Gifford Eafe

Global Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Technology Portfolio 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 Eafe

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baillie Gifford Eafe 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.

Pair Trading with Global Technology and Baillie Gifford

The main advantage of trading using opposite Global Technology and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Technology 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 Global Technology Portfolio and Baillie Gifford Eafe 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.