Correlation Between World Energy and Baillie Gifford
Can any of the company-specific risk be diversified away by investing in both World Energy 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 World Energy and Baillie Gifford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Energy Fund and Baillie Gifford Emerging, you can compare the effects of market volatilities on World Energy 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 World Energy with a short position of Baillie Gifford. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and Baillie Gifford.
Diversification Opportunities for World Energy and Baillie Gifford
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between World and Baillie is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund 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 World Energy 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 World Energy 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 Emerging has no effect on the direction of World Energy i.e., World Energy and Baillie Gifford go up and down completely randomly.
Pair Corralation between World Energy and Baillie Gifford
Assuming the 90 days horizon World Energy Fund is expected to generate 1.5 times more return on investment than Baillie Gifford. However, World Energy is 1.5 times more volatile than Baillie Gifford Emerging. It trades about 0.31 of its potential returns per unit of risk. Baillie Gifford Emerging is currently generating about -0.17 per unit of risk. If you would invest 1,405 in World Energy Fund on September 4, 2024 and sell it today you would earn a total of 123.00 from holding World Energy Fund or generate 8.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Energy Fund vs. Baillie Gifford Emerging
Performance |
| Timeline |
| World Energy |
| Baillie Gifford Emerging |
World Energy and Baillie Gifford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Energy and Baillie Gifford
The main advantage of trading using opposite World Energy and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Energy 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.| World Energy vs. Vanguard Financials Index | World Energy vs. 1919 Financial Services | World Energy vs. Fidelity Advisor Financial | World Energy vs. Blackrock Financial Institutions |
| Baillie Gifford vs. Oil Gas Ultrasector | Baillie Gifford vs. World Energy Fund | Baillie Gifford vs. Dreyfus Natural Resources | Baillie Gifford vs. Gmo Resources |
Check out your portfolio center.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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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