Correlation Between Large Cap and Great West

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

By analyzing existing cross correlation between Large Cap Growth Profund and Great West Sp 500, you can compare the effects of market volatilities on Large Cap 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 Large Cap with a short position of Great West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and Great West.

Diversification Opportunities for Large Cap and Great West

0.78

Correlation Coefficient

Large Cap  Great West

Poor diversification

The 3 months correlation between Large and Great is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Growth Profund and Great West Sp 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Sp and Large Cap 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 Large Cap Growth Profund 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 Sp has no effect on the direction of Large Cap i.e., Large Cap and Great West go up and down completely randomly.

Pair Corralation between Large Cap and Great West

Assuming the 90 days horizon Large Cap Growth Profund is expected to under-perform the Great West. In addition to that, Large Cap is 1.44 times more volatile than Great West Sp 500. It trades about -0.11 of its total potential returns per unit of risk. Great West Sp 500 is currently generating about -0.09 per unit of volatility. If you would invest  3,834  in Great West Sp 500 on December 21, 2024 and sell it today you would lose (201.00) from holding Great West Sp 500 or give up 5.24% of portfolio value over 90 days.

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

Large Cap Growth Profund  vs.  Great West Sp 500

Large Cap Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Large Cap Growth Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward 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 Sp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Great West Sp 500 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward 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 Large Cap and Great West

The main advantage of trading using opposite Large Cap and Great West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap 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 Large Cap Growth Profund and Great West Sp 500 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..