Correlation Between Great West and National Bank

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

Diversification Opportunities for Great West and National Bank

-0.84

Correlation Coefficient

Great West  National Bank

Pay attention - limited upside

The 3 months correlation between Great and National is -0.84. 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 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 i.e., Great West and National Bank go up and down completely randomly.

Pair Corralation between Great West and National Bank

Assuming the 90 days trading horizon Great West Lifeco is expected to generate 1.43 times more return on investment than National Bank. However, Great West is 1.43 times more volatile than National Bank of. It trades about 0.17 of its potential returns per unit of risk. National Bank of is currently generating about -0.13 per unit of risk. If you would invest  4,696  in Great West Lifeco on December 29, 2024 and sell it today you would earn a total of  830.00  from holding Great West Lifeco or generate 17.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Great West Lifeco  vs.  National Bank of

Great West Lifeco

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Lifeco are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Great West displayed solid returns over the last few months and may actually be approaching a breakup point.

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 latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Great West and National Bank

The main advantage of trading using opposite Great West and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great West 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..