Correlation Between Great-West Lifeco and National Bank

Can any of the company-specific risk be diversified away by investing in both Great-West Lifeco and National Bank 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 Lifeco and National Bank 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 National Bank of, you can compare the effects of market volatilities on Great-West Lifeco and National Bank 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 Lifeco with a short position of National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great-West Lifeco and National Bank.

Diversification Opportunities for Great-West Lifeco and National Bank

-0.55

Correlation Coefficient

Great-West Lifeco  National Bank

Excellent diversification

The 3 months correlation between Great-West and National is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Great West Lifeco and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank and Great-West Lifeco 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of Great-West Lifeco i.e., Great-West Lifeco and National Bank go up and down completely randomly.

Pair Corralation between Great-West Lifeco and National Bank

Assuming the 90 days trading horizon Great West Lifeco is expected to generate 1.36 times more return on investment than National Bank. However, Great-West Lifeco is 1.36 times more volatile than National Bank of. It trades about 0.08 of its potential returns per unit of risk. National Bank of is currently generating about -0.19 per unit of risk. If you would invest  4,985  in Great West Lifeco on December 2, 2024 and sell it today you would earn a total of  389.00  from holding Great West Lifeco or generate 7.8% return on investment over 90 days.

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

Great West Lifeco  vs.  National Bank of

Great West Lifeco

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Lifeco are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Great-West Lifeco may actually be approaching a critical reversion point that can send shares even higher in April 2025.

National Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Great-West Lifeco and National Bank

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

The idea behind Great West Lifeco and National Bank of 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 Transaction History module to view history of all your transactions and understand their impact on performance.