Correlation Between T Rowe and Baillie Gifford

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

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

Diversification Opportunities for T Rowe and Baillie Gifford

0.74

Correlation Coefficient

T Rowe  Baillie Gifford

Poor diversification

The 3 months correlation between PRFHX and Baillie is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price 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 T Rowe 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 T Rowe Price 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 T Rowe i.e., T Rowe and Baillie Gifford go up and down completely randomly.

Pair Corralation between T Rowe and Baillie Gifford

Assuming the 90 days horizon T Rowe is expected to generate 4.86 times less return on investment than Baillie Gifford. But when comparing it to its historical volatility, T Rowe Price is 3.68 times less risky than Baillie Gifford. It trades about 0.15 of its potential returns per unit of risk. Baillie Gifford International is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,324  in Baillie Gifford International on December 3, 2024 and sell it today you would earn a total of  94.00  from holding Baillie Gifford International or generate 7.1% return on investment over 90 days.

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

T Rowe Price  vs.  Baillie Gifford International

T Rowe Price

Risk-Adjusted Performance

Very Weak

Over the last 90 days T Rowe Price has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, T Rowe 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

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Baillie Gifford International are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. 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 T Rowe and Baillie Gifford

The main advantage of trading using opposite T Rowe and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe 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 T Rowe Price 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.