Correlation Between Baillie Gifford and Metropolitan West
Can any of the company-specific risk be diversified away by investing in both Baillie Gifford and Metropolitan West 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 Baillie Gifford and Metropolitan West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baillie Gifford Health and Metropolitan West Investment, you can compare the effects of market volatilities on Baillie Gifford and Metropolitan West 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 Baillie Gifford with a short position of Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baillie Gifford and Metropolitan West.
Diversification Opportunities for Baillie Gifford and Metropolitan West
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Baillie and Metropolitan is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Baillie Gifford Health and Metropolitan West Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West and Baillie Gifford 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 Baillie Gifford Health are associated (or correlated) with Metropolitan West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan West has no effect on the direction of Baillie Gifford i.e., Baillie Gifford and Metropolitan West go up and down completely randomly.
Pair Corralation between Baillie Gifford and Metropolitan West
Assuming the 90 days horizon Baillie Gifford Health is expected to under-perform the Metropolitan West. In addition to that, Baillie Gifford is 4.28 times more volatile than Metropolitan West Investment. It trades about -0.03 of its total potential returns per unit of risk. Metropolitan West Investment is currently generating about 0.08 per unit of volatility. If you would invest 716.00 in Metropolitan West Investment on September 12, 2024 and sell it today you would earn a total of 68.00 from holding Metropolitan West Investment or generate 9.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baillie Gifford Health vs. Metropolitan West Investment
Performance |
| Timeline |
| Baillie Gifford Health |
| Metropolitan West |
Baillie Gifford and Metropolitan West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baillie Gifford and Metropolitan West
The main advantage of trading using opposite Baillie Gifford and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baillie Gifford position performs unexpectedly, Metropolitan West 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 Metropolitan West will offset losses from the drop in Metropolitan West's long position.| Baillie Gifford vs. Lord Abbett Diversified | Baillie Gifford vs. Federated Hermes Conservative | Baillie Gifford vs. Western Asset Diversified | Baillie Gifford vs. Global Diversified Income |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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