Correlation Between Great West and Vulcan Value

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

Diversification Opportunities for Great West and Vulcan Value

0.84

Correlation Coefficient

Great West  Vulcan Value

Very poor diversification

The 3 months correlation between Great and Vulcan is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Great West Goldman Sachs and Vulcan Value Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Value Partners 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 Vulcan Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Value Partners has no effect on the direction of Great West i.e., Great West and Vulcan Value go up and down completely randomly.

Pair Corralation between Great West and Vulcan Value

Assuming the 90 days horizon Great West is expected to generate 1.08 times less return on investment than Vulcan Value. But when comparing it to its historical volatility, Great West Goldman Sachs is 1.05 times less risky than Vulcan Value. It trades about 0.1 of its potential returns per unit of risk. Vulcan Value Partners is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,722  in Vulcan Value Partners on September 17, 2024 and sell it today you would earn a total of  137.00  from holding Vulcan Value Partners or generate 5.03% return on investment over 90 days.

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

Great West Goldman Sachs  vs.  Vulcan Value Partners

Great West Goldman

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Goldman Sachs are ranked lower than 7 (%) 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.

Vulcan Value Partners

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Value Partners are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Vulcan Value 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 Vulcan Value

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

The idea behind Great West Goldman Sachs and Vulcan Value Partners 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.