Correlation Between Columbia Moderate and Great-west Lifetime

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

By analyzing existing cross correlation between Columbia Moderate Growth and Great West Lifetime 2040, you can compare the effects of market volatilities on Columbia Moderate and Great-west Lifetime 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 Columbia Moderate with a short position of Great-west Lifetime. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Moderate and Great-west Lifetime.

Diversification Opportunities for Columbia Moderate and Great-west Lifetime

0.93

Correlation Coefficient

Columbia Moderate  Great-west Lifetime

Almost no diversification

The 3 months correlation between Columbia and Great-west is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Moderate Growth and Great West Lifetime 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifetime and Columbia Moderate 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 Columbia Moderate Growth are associated (or correlated) with Great-west Lifetime. 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 Columbia Moderate i.e., Columbia Moderate and Great-west Lifetime go up and down completely randomly.

Pair Corralation between Columbia Moderate and Great-west Lifetime

Assuming the 90 days horizon Columbia Moderate Growth is expected to under-perform the Great-west Lifetime. But the mutual fund apears to be less risky and, when comparing its historical volatility, Columbia Moderate Growth is 1.49 times less risky than Great-west Lifetime. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Great West Lifetime 2040 is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,073  in Great West Lifetime 2040 on December 23, 2024 and sell it today you would earn a total of  2.00  from holding Great West Lifetime 2040 or generate 0.19% return on investment over 90 days.

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

Columbia Moderate Growth  vs.  Great West Lifetime 2040

Columbia Moderate Growth

Risk-Adjusted Performance

Very Weak

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

Great West Lifetime

Risk-Adjusted Performance

Very Weak

Over the last 90 days Great West Lifetime 2040 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Great-west Lifetime is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Columbia Moderate and Great-west Lifetime

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

The idea behind Columbia Moderate Growth and Great West Lifetime 2040 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.