Correlation Between Rational Defensive and Great-west Lifetime

Can any of the company-specific risk be diversified away by investing in both Rational Defensive 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 Rational Defensive 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 Rational Defensive Growth and Great West Lifetime 2020, you can compare the effects of market volatilities on Rational Defensive 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 Rational Defensive with a short position of Great-west Lifetime. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Defensive and Great-west Lifetime.

Diversification Opportunities for Rational Defensive and Great-west Lifetime

0.51

Correlation Coefficient

Rational Defensive  Great-west Lifetime

Very weak diversification

The 3 months correlation between Rational and Great-west is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Great West Lifetime 2020 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifetime and Rational Defensive 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 Rational Defensive 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 Rational Defensive i.e., Rational Defensive and Great-west Lifetime go up and down completely randomly.

Pair Corralation between Rational Defensive and Great-west Lifetime

Assuming the 90 days horizon Rational Defensive Growth is expected to under-perform the Great-west Lifetime. In addition to that, Rational Defensive is 3.14 times more volatile than Great West Lifetime 2020. It trades about -0.1 of its total potential returns per unit of risk. Great West Lifetime 2020 is currently generating about 0.04 per unit of volatility. If you would invest  1,040  in Great West Lifetime 2020 on December 22, 2024 and sell it today you would earn a total of  10.00  from holding Great West Lifetime 2020 or generate 0.96% return on investment over 90 days.

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

Rational Defensive Growth  vs.  Great West Lifetime 2020

Rational Defensive Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rational Defensive Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Great West Lifetime

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Lifetime 2020 are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical 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 Rational Defensive and Great-west Lifetime

The main advantage of trading using opposite Rational Defensive and Great-west Lifetime positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rational Defensive 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 Rational Defensive Growth and Great West Lifetime 2020 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.