Correlation Between NYSE Composite and Baillie Gifford

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

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

Diversification Opportunities for NYSE Composite and Baillie Gifford

-0.39

Correlation Coefficient

NYSE Composite  Baillie Gifford

Very good diversification

The 3 months correlation between NYSE and Baillie is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Baillie Gifford Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baillie Gifford Health and NYSE Composite 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 NYSE Composite 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 Health has no effect on the direction of NYSE Composite i.e., NYSE Composite and Baillie Gifford go up and down completely randomly.

Pair Corralation between NYSE Composite and Baillie Gifford

Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.55 times more return on investment than Baillie Gifford. However, NYSE Composite is 1.8 times less risky than Baillie Gifford. It trades about 0.17 of its potential returns per unit of risk. Baillie Gifford Health is currently generating about -0.01 per unit of risk. If you would invest  1,901,742  in NYSE Composite on September 2, 2024 and sell it today you would earn a total of  125,462  from holding NYSE Composite or generate 6.6% return on investment over 90 days.

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

NYSE Composite  vs.  Baillie Gifford Health

Pair Trading with NYSE Composite and Baillie Gifford

The main advantage of trading using opposite NYSE Composite and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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 NYSE Composite and Baillie Gifford Health 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.