Correlation Between Auto Trader and Baillie Gifford
Can any of the company-specific risk be diversified away by investing in both Auto Trader 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 Auto Trader and Baillie Gifford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and Baillie Gifford European, you can compare the effects of market volatilities on Auto Trader 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 Auto Trader with a short position of Baillie Gifford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Baillie Gifford.
Diversification Opportunities for Auto Trader and Baillie Gifford
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Auto and Baillie is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Baillie Gifford European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baillie Gifford European and Auto Trader 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 Auto Trader Group 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 European has no effect on the direction of Auto Trader i.e., Auto Trader and Baillie Gifford go up and down completely randomly.
Pair Corralation between Auto Trader and Baillie Gifford
Assuming the 90 days trading horizon Auto Trader Group is expected to generate 1.33 times more return on investment than Baillie Gifford. However, Auto Trader is 1.33 times more volatile than Baillie Gifford European. It trades about 0.06 of its potential returns per unit of risk. Baillie Gifford European is currently generating about 0.02 per unit of risk. If you would invest 55,517 in Auto Trader Group on November 30, 2024 and sell it today you would earn a total of 22,103 from holding Auto Trader Group or generate 39.81% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Auto Trader Group vs. Baillie Gifford European
Performance |
Timeline |
Auto Trader Group |
Baillie Gifford European |
Auto Trader and Baillie Gifford Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Auto Trader and Baillie Gifford
The main advantage of trading using opposite Auto Trader and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader 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.Auto Trader vs. Critical Metals Plc | ||
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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