Correlation Between Small-midcap Dividend and Baillie Gifford

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

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

Diversification Opportunities for Small-midcap Dividend and Baillie Gifford

-0.21

Correlation Coefficient

Small-midcap Dividend  Baillie Gifford

Very good diversification

The 3 months correlation between Small-midcap and Baillie is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Small Midcap Dividend Income 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 Small-midcap Dividend 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 Small Midcap Dividend Income 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 Small-midcap Dividend i.e., Small-midcap Dividend and Baillie Gifford go up and down completely randomly.

Pair Corralation between Small-midcap Dividend and Baillie Gifford

Assuming the 90 days horizon Small Midcap Dividend Income is expected to under-perform the Baillie Gifford. But the mutual fund apears to be less risky and, when comparing its historical volatility, Small Midcap Dividend Income is 1.77 times less risky than Baillie Gifford. The mutual fund trades about -0.19 of its potential returns per unit of risk. The Baillie Gifford Health is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  585.00  in Baillie Gifford Health on October 7, 2024 and sell it today you would lose (12.00) from holding Baillie Gifford Health or give up 2.05% of portfolio value over 90 days.

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

Small Midcap Dividend Income  vs.  Baillie Gifford Health

Small Midcap Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Midcap Dividend Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Small-midcap Dividend is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Baillie Gifford Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baillie Gifford Health has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental 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 Small-midcap Dividend and Baillie Gifford

The main advantage of trading using opposite Small-midcap Dividend and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-midcap Dividend 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 Small Midcap Dividend Income 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.