Correlation Between Washington Mutual and Baillie Gifford

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

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

Diversification Opportunities for Washington Mutual and Baillie Gifford

0.08

Correlation Coefficient

Washington Mutual  Baillie Gifford

Significant diversification

The 3 months correlation between Washington and Baillie is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Washington Mutual Investors and Baillie Gifford Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baillie Gifford Emerging and Washington Mutual 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 Washington Mutual Investors 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 Emerging has no effect on the direction of Washington Mutual i.e., Washington Mutual and Baillie Gifford go up and down completely randomly.

Pair Corralation between Washington Mutual and Baillie Gifford

Assuming the 90 days horizon Washington Mutual Investors is expected to under-perform the Baillie Gifford. But the mutual fund apears to be less risky and, when comparing its historical volatility, Washington Mutual Investors is 1.46 times less risky than Baillie Gifford. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Baillie Gifford Emerging is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,126  in Baillie Gifford Emerging on September 12, 2024 and sell it today you would lose (15.00) from holding Baillie Gifford Emerging or give up 0.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Washington Mutual Investors  vs.  Baillie Gifford Emerging

Washington Mutual

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Washington Mutual Investors are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Washington Mutual is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Baillie Gifford Emerging

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Baillie Gifford Emerging are ranked lower than 2 (%) 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 Washington Mutual and Baillie Gifford

The main advantage of trading using opposite Washington Mutual and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Mutual 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 Washington Mutual Investors and Baillie Gifford Emerging 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.