Correlation Between Great-west Bond and Sp Midcap

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

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

Diversification Opportunities for Great-west Bond and Sp Midcap

0.37

Correlation Coefficient

Great-west Bond  Sp Midcap

Weak diversification

The 3 months correlation between Great-west and SPMIX is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Great West Bond Index and Sp Midcap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp Midcap Index and Great-west Bond 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 Bond Index are associated (or correlated) with Sp Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp Midcap Index has no effect on the direction of Great-west Bond i.e., Great-west Bond and Sp Midcap go up and down completely randomly.

Pair Corralation between Great-west Bond and Sp Midcap

Assuming the 90 days horizon Great West Bond Index is expected to generate 0.49 times more return on investment than Sp Midcap. However, Great West Bond Index is 2.04 times less risky than Sp Midcap. It trades about -0.46 of its potential returns per unit of risk. Sp Midcap Index is currently generating about -0.27 per unit of risk. If you would invest  1,313  in Great West Bond Index on October 7, 2024 and sell it today you would lose (60.00) from holding Great West Bond Index or give up 4.57% of portfolio value over 90 days.

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

Great West Bond Index  vs.  Sp Midcap Index

Great West Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sp Midcap Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sp Midcap Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Sp Midcap 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 Bond and Sp Midcap

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

The idea behind Great West Bond Index and Sp Midcap Index 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.