Correlation Between Great West and Great-west Moderate

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

By analyzing existing cross correlation between Great West Lifetime 2020 and Great West Moderate Profile, you can compare the effects of market volatilities on Great West and Great-west Moderate 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 Great-west Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great West and Great-west Moderate.

Diversification Opportunities for Great West and Great-west Moderate

0.93

Correlation Coefficient

Great West  Great-west Moderate

Almost no diversification

The 3 months correlation between Great and Great-west is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Great West Lifetime 2020 and Great West Moderate Profile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Moderate 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 Lifetime 2020 are associated (or correlated) with Great-west Moderate. 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 Moderate has no effect on the direction of Great West i.e., Great West and Great-west Moderate go up and down completely randomly.

Pair Corralation between Great West and Great-west Moderate

Assuming the 90 days horizon Great West Lifetime 2020 is expected to under-perform the Great-west Moderate. But the mutual fund apears to be less risky and, when comparing its historical volatility, Great West Lifetime 2020 is 1.02 times less risky than Great-west Moderate. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Great West Moderate Profile is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,166  in Great West Moderate Profile on October 10, 2024 and sell it today you would lose (35.00) from holding Great West Moderate Profile or give up 3.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Great West Lifetime 2020  vs.  Great West Moderate Profile

Great West Lifetime

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great West Lifetime 2020 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Great West is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Great West Moderate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great West Moderate Profile has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Great-west Moderate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Great West and Great-west Moderate

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

The idea behind Great West Lifetime 2020 and Great West Moderate Profile 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.