Correlation Between International Equity and Baillie Gifford
Can any of the company-specific risk be diversified away by investing in both International Equity 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 International Equity and Baillie Gifford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The International Equity and Baillie Gifford Emerging, you can compare the effects of market volatilities on International Equity 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 International Equity with a short position of Baillie Gifford. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equity and Baillie Gifford.
Diversification Opportunities for International Equity and Baillie Gifford
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between International and Baillie is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding The International Equity 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 International Equity 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 The International Equity 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 International Equity i.e., International Equity and Baillie Gifford go up and down completely randomly.
Pair Corralation between International Equity and Baillie Gifford
Assuming the 90 days horizon The International Equity is expected to under-perform the Baillie Gifford. In addition to that, International Equity is 1.5 times more volatile than Baillie Gifford Emerging. It trades about -0.08 of its total potential returns per unit of risk. Baillie Gifford Emerging is currently generating about -0.03 per unit of volatility. If you would invest 1,983 in Baillie Gifford Emerging on October 19, 2024 and sell it today you would lose (23.00) from holding Baillie Gifford Emerging or give up 1.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The International Equity vs. Baillie Gifford Emerging
Performance |
| Timeline |
| The International Equity |
| Baillie Gifford Emerging |
International Equity and Baillie Gifford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Equity and Baillie Gifford
The main advantage of trading using opposite International Equity and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equity 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.| International Equity vs. Ubs Money Series | International Equity vs. Pioneer Money Market | International Equity vs. Ab Government Exchange | International Equity vs. Edward Jones Money |
| Baillie Gifford vs. Morningstar Global Income | Baillie Gifford vs. Dreyfusstandish Global Fixed | Baillie Gifford vs. Mirova Global Green | Baillie Gifford vs. Tax Managed Large Cap |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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