Correlation Between Great-west Moderate and Great-west Aggressive

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

By analyzing existing cross correlation between Great West Moderate Profile and Great West Aggressive Profile, you can compare the effects of market volatilities on Great-west Moderate and Great-west Aggressive 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 Moderate with a short position of Great-west Aggressive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great-west Moderate and Great-west Aggressive.

Diversification Opportunities for Great-west Moderate and Great-west Aggressive

0.97

Correlation Coefficient

Great-west Moderate  Great-west Aggressive

Almost no diversification

The 3 months correlation between Great-west and Great-west is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Great West Moderate Profile and Great West Aggressive Profile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Aggressive and Great-west Moderate 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 Moderate Profile are associated (or correlated) with Great-west Aggressive. 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 Aggressive has no effect on the direction of Great-west Moderate i.e., Great-west Moderate and Great-west Aggressive go up and down completely randomly.

Pair Corralation between Great-west Moderate and Great-west Aggressive

Assuming the 90 days horizon Great West Moderate Profile is expected to under-perform the Great-west Aggressive. In addition to that, Great-west Moderate is 1.04 times more volatile than Great West Aggressive Profile. It trades about -0.28 of its total potential returns per unit of risk. Great West Aggressive Profile is currently generating about -0.29 per unit of volatility. If you would invest  608.00  in Great West Aggressive Profile on October 9, 2024 and sell it today you would lose (42.00) from holding Great West Aggressive Profile or give up 6.91% of portfolio value over 90 days.

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

Great West Moderate Profile  vs.  Great West Aggressive Profile

Great West Moderate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great West Moderate Profile has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Great-west Moderate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Great West Aggressive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great West Aggressive Profile has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Great-west Aggressive 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 Moderate and Great-west Aggressive

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

The idea behind Great West Moderate Profile and Great West Aggressive Profile 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.