Correlation Between Ab Global and Great West

Can any of the company-specific risk be diversified away by investing in both Ab Global and Great West 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 Ab Global and Great West into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ab Global Risk and Great West Lifetime 2050, you can compare the effects of market volatilities on Ab Global and Great West 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 Ab Global with a short position of Great West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Global and Great West.

Diversification Opportunities for Ab Global and Great West

0.08

Correlation Coefficient

Ab Global  Great West

Significant diversification

The 3 months correlation between CABIX and Great is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ab Global Risk and Great West Lifetime 2050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifetime and Ab Global 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 Ab Global Risk are associated (or correlated) with Great West. 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 Lifetime has no effect on the direction of Ab Global i.e., Ab Global and Great West go up and down completely randomly.

Pair Corralation between Ab Global and Great West

Assuming the 90 days horizon Ab Global Risk is expected to under-perform the Great West. In addition to that, Ab Global is 3.42 times more volatile than Great West Lifetime 2050. It trades about -0.12 of its total potential returns per unit of risk. Great West Lifetime 2050 is currently generating about 0.08 per unit of volatility. If you would invest  1,176  in Great West Lifetime 2050 on September 17, 2024 and sell it today you would earn a total of  31.00  from holding Great West Lifetime 2050 or generate 2.64% return on investment over 90 days.

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

Ab Global Risk  vs.  Great West Lifetime 2050

Ab Global Risk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ab Global Risk has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Great West Lifetime

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Lifetime 2050 are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Great West is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ab Global and Great West

The main advantage of trading using opposite Ab Global and Great West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Global position performs unexpectedly, Great West 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 will offset losses from the drop in Great West's long position.

The idea behind Ab Global Risk and Great West Lifetime 2050 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.