Correlation Between Baillie Gifford and Scottish Mortgage
Can any of the company-specific risk be diversified away by investing in both Baillie Gifford and Scottish Mortgage 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 Baillie Gifford and Scottish Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baillie Gifford Growth and Scottish Mortgage Investment, you can compare the effects of market volatilities on Baillie Gifford and Scottish Mortgage 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 Baillie Gifford with a short position of Scottish Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baillie Gifford and Scottish Mortgage.
Diversification Opportunities for Baillie Gifford and Scottish Mortgage
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Baillie and Scottish is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Baillie Gifford Growth and Scottish Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scottish Mortgage and Baillie Gifford 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 Baillie Gifford Growth are associated (or correlated) with Scottish Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scottish Mortgage has no effect on the direction of Baillie Gifford i.e., Baillie Gifford and Scottish Mortgage go up and down completely randomly.
Pair Corralation between Baillie Gifford and Scottish Mortgage
Assuming the 90 days trading horizon Baillie Gifford Growth is expected to generate 0.86 times more return on investment than Scottish Mortgage. However, Baillie Gifford Growth is 1.17 times less risky than Scottish Mortgage. It trades about 0.14 of its potential returns per unit of risk. Scottish Mortgage Investment is currently generating about 0.06 per unit of risk. If you would invest 18,960 in Baillie Gifford Growth on August 27, 2024 and sell it today you would earn a total of 7,040 from holding Baillie Gifford Growth or generate 37.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baillie Gifford Growth vs. Scottish Mortgage Investment
Performance |
| Timeline |
| Baillie Gifford Growth |
| Scottish Mortgage |
Baillie Gifford and Scottish Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baillie Gifford and Scottish Mortgage
The main advantage of trading using opposite Baillie Gifford and Scottish Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baillie Gifford position performs unexpectedly, Scottish Mortgage 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 Scottish Mortgage will offset losses from the drop in Scottish Mortgage's long position.The idea behind Baillie Gifford Growth and Scottish Mortgage Investment 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.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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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