Correlation Between Great West and CI Financial

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

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

Diversification Opportunities for Great West and CI Financial

0.79

Correlation Coefficient

Great West  CI Financial

Poor diversification

The 3 months correlation between Great and CIX is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Great West Lifeco and CI Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Financial Corp and Great West 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 Great West Lifeco are associated (or correlated) with CI Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Financial Corp has no effect on the direction of Great West i.e., Great West and CI Financial go up and down completely randomly.

Pair Corralation between Great West and CI Financial

Assuming the 90 days trading horizon Great West is expected to generate 5.1 times less return on investment than CI Financial. But when comparing it to its historical volatility, Great West Lifeco is 5.2 times less risky than CI Financial. It trades about 0.26 of its potential returns per unit of risk. CI Financial Corp is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,705  in CI Financial Corp on September 3, 2024 and sell it today you would earn a total of  1,400  from holding CI Financial Corp or generate 82.11% return on investment over 90 days.

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

Great West Lifeco  vs.  CI Financial Corp

Great West Lifeco

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Lifeco are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Great West may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CI Financial Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CI Financial Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CI Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Great West and CI Financial

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

The idea behind Great West Lifeco and CI Financial Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..