Correlation Between Great-west Bond and Great-west Core

Can any of the company-specific risk be diversified away by investing in both Great-west Bond and Great-west Core 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 Great-west Core 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 Great West E Strategies, you can compare the effects of market volatilities on Great-west Bond and Great-west Core 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 Great-west Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great-west Bond and Great-west Core.

Diversification Opportunities for Great-west Bond and Great-west Core

-0.45

Correlation Coefficient

Great-west Bond  Great-west Core

Very good diversification

The 3 months correlation between Great-west and Great-west is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Great West Bond Index and Great West E Strategies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great-west Core 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 Great-west Core. 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 Core has no effect on the direction of Great-west Bond i.e., Great-west Bond and Great-west Core go up and down completely randomly.

Pair Corralation between Great-west Bond and Great-west Core

Assuming the 90 days horizon Great West Bond Index is expected to generate 0.22 times more return on investment than Great-west Core. However, Great West Bond Index is 4.51 times less risky than Great-west Core. It trades about 0.17 of its potential returns per unit of risk. Great West E Strategies is currently generating about -0.13 per unit of risk. If you would invest  809.00  in Great West Bond Index on December 22, 2024 and sell it today you would earn a total of  24.00  from holding Great West Bond Index or generate 2.97% return on investment over 90 days.

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

Great West Bond Index  vs.  Great West E Strategies

Great West Bond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Bond Index are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic 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.

Great-west Core

Risk-Adjusted Performance

Very Weak

Over the last 90 days Great West E Strategies has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Great-west Bond and Great-west Core

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

The idea behind Great West Bond Index and Great West E Strategies 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.