Correlation Between Red Oak and Baillie Gifford
Can any of the company-specific risk be diversified away by investing in both Red Oak 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 Red Oak and Baillie Gifford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Red Oak Technology and Baillie Gifford Discovery, you can compare the effects of market volatilities on Red Oak 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 Red Oak with a short position of Baillie Gifford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Oak and Baillie Gifford.
Diversification Opportunities for Red Oak and Baillie Gifford
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Red and Baillie is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Red Oak Technology and Baillie Gifford Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baillie Gifford Discovery and Red Oak 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 Red Oak Technology 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 Discovery has no effect on the direction of Red Oak i.e., Red Oak and Baillie Gifford go up and down completely randomly.
Pair Corralation between Red Oak and Baillie Gifford
Assuming the 90 days horizon Red Oak Technology is expected to generate 0.75 times more return on investment than Baillie Gifford. However, Red Oak Technology is 1.33 times less risky than Baillie Gifford. It trades about 0.09 of its potential returns per unit of risk. Baillie Gifford Discovery is currently generating about 0.02 per unit of risk. If you would invest 3,527 in Red Oak Technology on September 12, 2024 and sell it today you would earn a total of 1,421 from holding Red Oak Technology or generate 40.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red Oak Technology vs. Baillie Gifford Discovery
Performance |
| Timeline |
| Red Oak Technology |
| Baillie Gifford Discovery |
Red Oak and Baillie Gifford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Oak and Baillie Gifford
The main advantage of trading using opposite Red Oak and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Oak 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.| Red Oak vs. Vanguard Information Technology | Red Oak vs. Technology Portfolio Technology | Red Oak vs. Fidelity Select Semiconductors | Red Oak vs. Software And It |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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