Correlation Between Great West and California Tax-free

Can any of the company-specific risk be diversified away by investing in both Great West and California Tax-free 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 California Tax-free 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 California Tax Free Fund, you can compare the effects of market volatilities on Great West and California Tax-free 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 California Tax-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great West and California Tax-free.

Diversification Opportunities for Great West and California Tax-free

0.1

Correlation Coefficient

Great West  California Tax-free

Average diversification

The 3 months correlation between Great and California is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Great West Goldman Sachs and California Tax Free Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Tax Free 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 California Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Tax Free has no effect on the direction of Great West i.e., Great West and California Tax-free go up and down completely randomly.

Pair Corralation between Great West and California Tax-free

Assuming the 90 days horizon Great West Goldman Sachs is expected to under-perform the California Tax-free. In addition to that, Great West is 11.44 times more volatile than California Tax Free Fund. It trades about -0.01 of its total potential returns per unit of risk. California Tax Free Fund is currently generating about 0.02 per unit of volatility. If you would invest  1,068  in California Tax Free Fund on December 24, 2024 and sell it today you would earn a total of  3.00  from holding California Tax Free Fund or generate 0.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Great West Goldman Sachs  vs.  California Tax Free Fund

Great West Goldman

Risk-Adjusted Performance

Very Weak

Over the last 90 days Great West Goldman Sachs has generated negative risk-adjusted returns adding no value to fund investors. 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.

California Tax Free

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in California Tax Free Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, California Tax-free 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 California Tax-free

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

The idea behind Great West Goldman Sachs and California Tax Free Fund 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.