Correlation Between Microsoft and Baillie Gifford
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Baillie Gifford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Baillie Gifford China, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Baillie Gifford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Baillie Gifford.
Diversification Opportunities for Microsoft and Baillie Gifford
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and Baillie is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Baillie Gifford China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baillie Gifford China and Microsoft 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 Microsoft 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 China has no effect on the direction of Microsoft i.e., Microsoft and Baillie Gifford go up and down completely randomly.
Pair Corralation between Microsoft and Baillie Gifford
Given the investment horizon of 90 days Microsoft is expected to generate 6.44 times less return on investment than Baillie Gifford. But when comparing it to its historical volatility, Microsoft is 1.27 times less risky than Baillie Gifford. It trades about 0.01 of its potential returns per unit of risk. Baillie Gifford China is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 780.00 in Baillie Gifford China on November 3, 2024 and sell it today you would earn a total of 122.00 from holding Baillie Gifford China or generate 15.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 84.68% |
| Values | Daily Returns |
Microsoft vs. Baillie Gifford China
Performance |
| Timeline |
| Microsoft |
| Baillie Gifford China |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Microsoft and Baillie Gifford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Baillie Gifford
The main advantage of trading using opposite Microsoft and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Baillie Gifford vs. Wesmark Government Bond | Baillie Gifford vs. Schwab Government Money | Baillie Gifford vs. Payden Government Fund | Baillie Gifford vs. Intermediate Government Bond |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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