Correlation Between Large-cap Growth and Baillie Gifford

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

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

Diversification Opportunities for Large-cap Growth and Baillie Gifford

-0.3

Correlation Coefficient

Large-cap Growth  Baillie Gifford

Very good diversification

The 3 months correlation between Large-cap and Baillie is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Growth Profund 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 Large-cap Growth 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 Large Cap Growth Profund 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 Large-cap Growth i.e., Large-cap Growth and Baillie Gifford go up and down completely randomly.

Pair Corralation between Large-cap Growth and Baillie Gifford

Assuming the 90 days horizon Large Cap Growth Profund is expected to under-perform the Baillie Gifford. In addition to that, Large-cap Growth is 1.45 times more volatile than Baillie Gifford Eafe. It trades about -0.08 of its total potential returns per unit of risk. Baillie Gifford Eafe is currently generating about 0.07 per unit of volatility. If you would invest  1,440  in Baillie Gifford Eafe on December 26, 2024 and sell it today you would earn a total of  55.00  from holding Baillie Gifford Eafe or generate 3.82% return on investment over 90 days.

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

Large Cap Growth Profund  vs.  Baillie Gifford Eafe

Large Cap Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Large Cap Growth Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward 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

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Baillie Gifford Eafe are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. 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 Large-cap Growth and Baillie Gifford

The main advantage of trading using opposite Large-cap Growth and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large-cap Growth 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 Large Cap Growth Profund 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.

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 Stocks Directory module to find actively traded stocks across global markets.