Correlation Between Great West and Eventide Healthcare

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

By analyzing existing cross correlation between Great West Goldman Sachs and Eventide Healthcare Life, you can compare the effects of market volatilities on Great West and Eventide Healthcare 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 Eventide Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great West and Eventide Healthcare.

Diversification Opportunities for Great West and Eventide Healthcare

-0.11

Correlation Coefficient

Great West  Eventide Healthcare

Good diversification

The 3 months correlation between Great and Eventide is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Great West Goldman Sachs and Eventide Healthcare Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eventide Healthcare Life 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 Goldman Sachs are associated (or correlated) with Eventide Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eventide Healthcare Life has no effect on the direction of Great West i.e., Great West and Eventide Healthcare go up and down completely randomly.

Pair Corralation between Great West and Eventide Healthcare

Assuming the 90 days horizon Great West Goldman Sachs is expected to generate 1.55 times more return on investment than Eventide Healthcare. However, Great West is 1.55 times more volatile than Eventide Healthcare Life. It trades about 0.03 of its potential returns per unit of risk. Eventide Healthcare Life is currently generating about -0.04 per unit of risk. If you would invest  846.00  in Great West Goldman Sachs on October 25, 2024 and sell it today you would earn a total of  17.00  from holding Great West Goldman Sachs or generate 2.01% return on investment over 90 days.

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

Great West Goldman Sachs  vs.  Eventide Healthcare Life

Great West Goldman

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Goldman Sachs are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, Great West is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eventide Healthcare Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eventide Healthcare Life has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Eventide Healthcare 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 Eventide Healthcare

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

The idea behind Great West Goldman Sachs and Eventide Healthcare Life 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.