Correlation Between InPlay Oil and Great West

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

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

Diversification Opportunities for InPlay Oil and Great West

0.91

Correlation Coefficient

InPlay Oil  Great West

Almost no diversification

The 3 months correlation between InPlay and Great is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding InPlay Oil Corp and Great West Lifeco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifeco and InPlay Oil 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 InPlay Oil Corp are associated (or correlated) with Great West. 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 Lifeco has no effect on the direction of InPlay Oil i.e., InPlay Oil and Great West go up and down completely randomly.

Pair Corralation between InPlay Oil and Great West

Assuming the 90 days trading horizon InPlay Oil Corp is expected to under-perform the Great West. In addition to that, InPlay Oil is 3.68 times more volatile than Great West Lifeco. It trades about -0.15 of its total potential returns per unit of risk. Great West Lifeco is currently generating about -0.08 per unit of volatility. If you would invest  2,186  in Great West Lifeco on September 12, 2024 and sell it today you would lose (56.00) from holding Great West Lifeco or give up 2.56% of portfolio value over 90 days.

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

InPlay Oil Corp  vs.  Great West Lifeco

InPlay Oil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InPlay Oil Corp 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 January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Great West Lifeco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great West Lifeco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Great West is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with InPlay Oil and Great West

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

The idea behind InPlay Oil Corp and Great West Lifeco 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.