Correlation Between Great West and Snow Capital

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

By analyzing existing cross correlation between Great West Lifetime 2050 and Snow Capital Small, you can compare the effects of market volatilities on Great West and Snow Capital 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 Snow Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great West and Snow Capital.

Diversification Opportunities for Great West and Snow Capital

0.73

Correlation Coefficient

Great West  Snow Capital

Poor diversification

The 3 months correlation between Great and Snow is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Great West Lifetime 2050 and Snow Capital Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snow Capital Small 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 2050 are associated (or correlated) with Snow Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snow Capital Small has no effect on the direction of Great West i.e., Great West and Snow Capital go up and down completely randomly.

Pair Corralation between Great West and Snow Capital

Assuming the 90 days horizon Great West Lifetime 2050 is expected to under-perform the Snow Capital. But the mutual fund apears to be less risky and, when comparing its historical volatility, Great West Lifetime 2050 is 1.87 times less risky than Snow Capital. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Snow Capital Small is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  6,236  in Snow Capital Small on October 5, 2024 and sell it today you would lose (84.00) from holding Snow Capital Small or give up 1.35% of portfolio value over 90 days.

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

Great West Lifetime 2050  vs.  Snow Capital Small

Great West Lifetime

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great West Lifetime 2050 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly 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.

Snow Capital Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Snow Capital Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Snow Capital 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 Snow Capital

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

The idea behind Great West Lifetime 2050 and Snow Capital Small 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.

Check out your portfolio center.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.