Correlation Between International Investors and Baillie Gifford
Can any of the company-specific risk be diversified away by investing in both International Investors 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 Investors and Baillie Gifford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Investors Gold and Baillie Gifford Health, you can compare the effects of market volatilities on International Investors 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 Investors with a short position of Baillie Gifford. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Investors and Baillie Gifford.
Diversification Opportunities for International Investors and Baillie Gifford
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between International and Baillie is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding International Investors Gold and Baillie Gifford Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baillie Gifford Health and International Investors 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 International Investors Gold 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 Health has no effect on the direction of International Investors i.e., International Investors and Baillie Gifford go up and down completely randomly.
Pair Corralation between International Investors and Baillie Gifford
Assuming the 90 days horizon International Investors Gold is expected to under-perform the Baillie Gifford. In addition to that, International Investors is 1.38 times more volatile than Baillie Gifford Health. It trades about -0.23 of its total potential returns per unit of risk. Baillie Gifford Health is currently generating about -0.11 per unit of volatility. If you would invest 596.00 in Baillie Gifford Health on August 29, 2024 and sell it today you would lose (23.00) from holding Baillie Gifford Health or give up 3.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Investors Gold vs. Baillie Gifford Health
Performance |
| Timeline |
| International Investors |
| Baillie Gifford Health |
International Investors and Baillie Gifford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Investors and Baillie Gifford
The main advantage of trading using opposite International Investors and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Investors 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.The idea behind International Investors Gold and Baillie Gifford Health pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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