Correlation Between Needham Aggressive and Baillie Gifford

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

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

Diversification Opportunities for Needham Aggressive and Baillie Gifford

0.55

Correlation Coefficient

Needham Aggressive  Baillie Gifford

Very weak diversification

The 3 months correlation between Needham and Baillie is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Needham Aggressive Growth and Baillie Gifford Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baillie Gifford Emerging and Needham Aggressive 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 Needham Aggressive 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 Emerging has no effect on the direction of Needham Aggressive i.e., Needham Aggressive and Baillie Gifford go up and down completely randomly.

Pair Corralation between Needham Aggressive and Baillie Gifford

Assuming the 90 days horizon Needham Aggressive Growth is expected to under-perform the Baillie Gifford. In addition to that, Needham Aggressive is 1.38 times more volatile than Baillie Gifford Emerging. It trades about -0.1 of its total potential returns per unit of risk. Baillie Gifford Emerging is currently generating about 0.01 per unit of volatility. If you would invest  893.00  in Baillie Gifford Emerging on December 29, 2024 and sell it today you would earn a total of  4.00  from holding Baillie Gifford Emerging or generate 0.45% return on investment over 90 days.

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

Needham Aggressive Growth  vs.  Baillie Gifford Emerging

Needham Aggressive Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Needham Aggressive Growth 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 Emerging

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baillie Gifford Emerging 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 Needham Aggressive and Baillie Gifford

The main advantage of trading using opposite Needham Aggressive and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Needham Aggressive 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 Needham Aggressive Growth and Baillie Gifford Emerging 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.