Correlation Between Small-cap Value and Great-west Loomis

Can any of the company-specific risk be diversified away by investing in both Small-cap Value and Great-west Loomis 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 Small-cap Value and Great-west Loomis into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Small Cap Value Fund and Great West Loomis Sayles, you can compare the effects of market volatilities on Small-cap Value and Great-west Loomis 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 Small-cap Value with a short position of Great-west Loomis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Value and Great-west Loomis.

Diversification Opportunities for Small-cap Value and Great-west Loomis

0.8

Correlation Coefficient

Small-cap Value  Great-west Loomis

Very poor diversification

The 3 months correlation between Small-cap and Great-west is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Fund and Great West Loomis Sayles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Loomis and Small-cap Value 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 Small Cap Value Fund are associated (or correlated) with Great-west Loomis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Loomis has no effect on the direction of Small-cap Value i.e., Small-cap Value and Great-west Loomis go up and down completely randomly.

Pair Corralation between Small-cap Value and Great-west Loomis

Assuming the 90 days horizon Small Cap Value Fund is expected to under-perform the Great-west Loomis. In addition to that, Small-cap Value is 1.52 times more volatile than Great West Loomis Sayles. It trades about -0.4 of its total potential returns per unit of risk. Great West Loomis Sayles is currently generating about -0.26 per unit of volatility. If you would invest  4,103  in Great West Loomis Sayles on October 8, 2024 and sell it today you would lose (238.00) from holding Great West Loomis Sayles or give up 5.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Small Cap Value Fund  vs.  Great West Loomis Sayles

Small Cap Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Small-cap Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Great West Loomis

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Loomis Sayles are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Great-west Loomis is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small-cap Value and Great-west Loomis

The main advantage of trading using opposite Small-cap Value and Great-west Loomis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-cap Value position performs unexpectedly, Great-west Loomis 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 Great-west Loomis will offset losses from the drop in Great-west Loomis' long position.

The idea behind Small Cap Value Fund and Great West Loomis Sayles 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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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.