Correlation Between American Funds and Baillie Gifford
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and Baillie Gifford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Global and Baillie Gifford Global, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of Baillie Gifford. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Baillie Gifford.
Diversification Opportunities for American Funds and Baillie Gifford
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Baillie is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Global and Baillie Gifford Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baillie Gifford Global and American Funds 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 American Funds Global 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 Global has no effect on the direction of American Funds i.e., American Funds and Baillie Gifford go up and down completely randomly.
Pair Corralation between American Funds and Baillie Gifford
Assuming the 90 days horizon American Funds Global is expected to under-perform the Baillie Gifford. But the mutual fund apears to be less risky and, when comparing its historical volatility, American Funds Global is 1.34 times less risky than Baillie Gifford. The mutual fund trades about -0.18 of its potential returns per unit of risk. The Baillie Gifford Global is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 1,714 in Baillie Gifford Global on January 19, 2024 and sell it today you would lose (45.00) from holding Baillie Gifford Global or give up 2.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Global vs. Baillie Gifford Global
Performance |
| Timeline |
| American Funds Global |
| Baillie Gifford Global |
American Funds and Baillie Gifford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Baillie Gifford
The main advantage of trading using opposite American Funds and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. American Funds New | American Funds vs. American Funds New | American Funds vs. New Perspective Fund | American Funds vs. New Perspective Fund |
| Baillie Gifford vs. American Funds New | Baillie Gifford vs. American Funds New | Baillie Gifford vs. New Perspective Fund | Baillie Gifford vs. New Perspective Fund |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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