Correlation Between Smead Value and Baillie Gifford

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

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

Diversification Opportunities for Smead Value and Baillie Gifford

0.31

Correlation Coefficient

Smead Value  Baillie Gifford

Weak diversification

The 3 months correlation between Smead and Baillie is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Smead Value Fund 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 Smead Value 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 Smead Value Fund 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 Smead Value i.e., Smead Value and Baillie Gifford go up and down completely randomly.

Pair Corralation between Smead Value and Baillie Gifford

Assuming the 90 days horizon Smead Value Fund is expected to under-perform the Baillie Gifford. But the mutual fund apears to be less risky and, when comparing its historical volatility, Smead Value Fund is 1.89 times less risky than Baillie Gifford. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Baillie Gifford Health is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  599.00  in Baillie Gifford Health on October 1, 2024 and sell it today you would lose (26.00) from holding Baillie Gifford Health or give up 4.34% of portfolio value over 90 days.

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

Smead Value Fund  vs.  Baillie Gifford Health

Smead Value Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smead Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential 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 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 Smead Value and Baillie Gifford

The main advantage of trading using opposite Smead Value and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smead Value 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 Smead Value Fund 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.