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 Eafe, 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
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and Baillie is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding The International Equity and Baillie Gifford Eafe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baillie Gifford Eafe 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 Eafe 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 International Equity is expected to generate 13.89 times less return on investment than Baillie Gifford. But when comparing it to its historical volatility, The International Equity is 1.34 times less risky than Baillie Gifford. It trades about 0.01 of its potential returns per unit of risk. Baillie Gifford Eafe is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,330 in Baillie Gifford Eafe on September 2, 2024 and sell it today you would earn a total of 87.00 from holding Baillie Gifford Eafe or generate 6.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The International Equity vs. Baillie Gifford Eafe
Performance |
| Timeline |
| The International Equity |
| Baillie Gifford Eafe |
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. The Eafe Pure | International Equity vs. The Long Term | International Equity vs. Baillie Gifford China | International Equity vs. Baillie Gifford China |
| Baillie Gifford vs. The Eafe Pure | Baillie Gifford vs. The Long Term | Baillie Gifford vs. Baillie Gifford China | Baillie Gifford vs. Baillie Gifford China |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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