Correlation Between Needham Small and Baillie Gifford

Can any of the company-specific risk be diversified away by investing in both Needham Small 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 Small 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 Small Cap and Baillie Gifford International, you can compare the effects of market volatilities on Needham Small 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 Small with a short position of Baillie Gifford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Needham Small and Baillie Gifford.

Diversification Opportunities for Needham Small and Baillie Gifford

0.0

Correlation Coefficient

Needham Small  Baillie Gifford

Pay attention - limited upside

The 3 months correlation between Needham and Baillie is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Needham Small Cap and Baillie Gifford International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baillie Gifford Inte and Needham Small 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 Small 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 Inte has no effect on the direction of Needham Small i.e., Needham Small and Baillie Gifford go up and down completely randomly.

Pair Corralation between Needham Small and Baillie Gifford

Assuming the 90 days horizon Needham Small Cap is expected to generate 1.24 times more return on investment than Baillie Gifford. However, Needham Small is 1.24 times more volatile than Baillie Gifford International. It trades about 0.01 of its potential returns per unit of risk. Baillie Gifford International is currently generating about -0.07 per unit of risk. If you would invest  1,921  in Needham Small Cap on October 11, 2024 and sell it today you would earn a total of  4.00  from holding Needham Small Cap or generate 0.21% return on investment over 90 days.

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

Needham Small Cap  vs.  Baillie Gifford International

Needham Small Cap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Needham Small Cap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Needham Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Baillie Gifford Inte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baillie Gifford International has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, 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 Small and Baillie Gifford

The main advantage of trading using opposite Needham Small and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Needham Small 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 Small Cap and Baillie Gifford International 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.