Correlation Between INTERSHOP Communications and Great-West Lifeco

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

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

Diversification Opportunities for INTERSHOP Communications and Great-West Lifeco

0.33

Correlation Coefficient

INTERSHOP Communications  Great-West Lifeco

Weak diversification

The 3 months correlation between INTERSHOP and Great-West is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding INTERSHOP Communications Aktie 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 INTERSHOP Communications 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 INTERSHOP Communications Aktiengesellschaft are associated (or correlated) with Great-West Lifeco. 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 INTERSHOP Communications i.e., INTERSHOP Communications and Great-West Lifeco go up and down completely randomly.

Pair Corralation between INTERSHOP Communications and Great-West Lifeco

Assuming the 90 days trading horizon INTERSHOP Communications Aktiengesellschaft is expected to under-perform the Great-West Lifeco. In addition to that, INTERSHOP Communications is 1.79 times more volatile than Great West Lifeco. It trades about -0.04 of its total potential returns per unit of risk. Great West Lifeco is currently generating about -0.02 per unit of volatility. If you would invest  3,108  in Great West Lifeco on October 24, 2024 and sell it today you would lose (48.00) from holding Great West Lifeco or give up 1.54% of portfolio value over 90 days.

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

INTERSHOP Communications Aktie  vs.  Great West Lifeco

INTERSHOP Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INTERSHOP Communications Aktiengesellschaft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, INTERSHOP Communications is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 nearly stable basic indicators, Great-West Lifeco is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with INTERSHOP Communications and Great-West Lifeco

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

The idea behind INTERSHOP Communications Aktiengesellschaft 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.