Correlation Between M Large and Baillie Gifford

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

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

Diversification Opportunities for M Large and Baillie Gifford

0.73

Correlation Coefficient

M Large  Baillie Gifford

Poor diversification

The 3 months correlation between MTCGX and Baillie is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding M Large Cap and Baillie Gifford Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baillie Gifford Discovery and M Large 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 M Large 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 Discovery has no effect on the direction of M Large i.e., M Large and Baillie Gifford go up and down completely randomly.

Pair Corralation between M Large and Baillie Gifford

Assuming the 90 days horizon M Large Cap is expected to generate 0.75 times more return on investment than Baillie Gifford. However, M Large Cap is 1.34 times less risky than Baillie Gifford. It trades about 0.08 of its potential returns per unit of risk. Baillie Gifford Discovery is currently generating about 0.04 per unit of risk. If you would invest  2,422  in M Large Cap on September 14, 2024 and sell it today you would earn a total of  1,335  from holding M Large Cap or generate 55.12% return on investment over 90 days.

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

M Large Cap  vs.  Baillie Gifford Discovery

M Large Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in M Large Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, M Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Baillie Gifford Discovery

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Baillie Gifford Discovery are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward 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 M Large and Baillie Gifford

The main advantage of trading using opposite M Large and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M Large 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 M Large Cap and Baillie Gifford Discovery 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.