Correlation Between Great-west and Great-west Securefoundation

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

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

Diversification Opportunities for Great-west and Great-west Securefoundation

0.84

Correlation Coefficient

Great-west  Great-west Securefoundation

Very poor diversification

The 3 months correlation between Great-west and Great-west is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Great West Government Mortgage and Great West Securefoundation Ba in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great-west Securefoundation 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 Government Mortgage are associated (or correlated) with Great-west Securefoundation. 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 Securefoundation has no effect on the direction of Great-west i.e., Great-west and Great-west Securefoundation go up and down completely randomly.

Pair Corralation between Great-west and Great-west Securefoundation

Assuming the 90 days horizon Great West Government Mortgage is expected to generate 0.49 times more return on investment than Great-west Securefoundation. However, Great West Government Mortgage is 2.06 times less risky than Great-west Securefoundation. It trades about -0.18 of its potential returns per unit of risk. Great West Securefoundation Balanced is currently generating about -0.17 per unit of risk. If you would invest  836.00  in Great West Government Mortgage on October 8, 2024 and sell it today you would lose (41.00) from holding Great West Government Mortgage or give up 4.9% of portfolio value over 90 days.

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

Great West Government Mortgage  vs.  Great West Securefoundation Ba

Great West Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great West Government Mortgage has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Securefoundation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great West Securefoundation Balanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators 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 and Great-west Securefoundation

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

The idea behind Great West Government Mortgage and Great West Securefoundation Balanced 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.