Correlation Between Dow Jones and Baillie Gifford
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Baillie Gifford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Baillie Gifford Growth, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Baillie Gifford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Baillie Gifford.
Diversification Opportunities for Dow Jones and Baillie Gifford
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and Baillie is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Baillie Gifford Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baillie Gifford Growth and Dow Jones 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 Dow Jones Industrial 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 Growth has no effect on the direction of Dow Jones i.e., Dow Jones and Baillie Gifford go up and down completely randomly.
Pair Corralation between Dow Jones and Baillie Gifford
Assuming the 90 days trading horizon Dow Jones is expected to generate 4.39 times less return on investment than Baillie Gifford. But when comparing it to its historical volatility, Dow Jones Industrial is 2.25 times less risky than Baillie Gifford. It trades about 0.25 of its potential returns per unit of risk. Baillie Gifford Growth is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest 21,550 in Baillie Gifford Growth on August 29, 2024 and sell it today you would earn a total of 5,400 from holding Baillie Gifford Growth or generate 25.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Dow Jones Industrial vs. Baillie Gifford Growth
Performance |
| Timeline |
Dow Jones and Baillie Gifford Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Baillie Gifford Growth
Pair trading matchups for Baillie Gifford
Pair Trading with Dow Jones and Baillie Gifford
The main advantage of trading using opposite Dow Jones and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| Baillie Gifford vs. iShares MSCI Japan | Baillie Gifford vs. Amundi EUR High | Baillie Gifford vs. iShares JP Morgan | Baillie Gifford vs. Xtrackers MSCI |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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