Correlation Between Pace Large and Great-west Lifetime

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

By analyzing existing cross correlation between Pace Large Value and Great West Lifetime 2020, you can compare the effects of market volatilities on Pace Large and Great-west Lifetime 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 Pace Large with a short position of Great-west Lifetime. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Large and Great-west Lifetime.

Diversification Opportunities for Pace Large and Great-west Lifetime

0.78

Correlation Coefficient

Pace Large  Great-west Lifetime

Poor diversification

The 3 months correlation between Pace and Great-west is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Pace Large Value and Great West Lifetime 2020 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifetime and Pace Large 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 Pace Large Value are associated (or correlated) with Great-west Lifetime. 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 Lifetime has no effect on the direction of Pace Large i.e., Pace Large and Great-west Lifetime go up and down completely randomly.

Pair Corralation between Pace Large and Great-west Lifetime

Assuming the 90 days horizon Pace Large Value is expected to generate 1.53 times more return on investment than Great-west Lifetime. However, Pace Large is 1.53 times more volatile than Great West Lifetime 2020. It trades about 0.29 of its potential returns per unit of risk. Great West Lifetime 2020 is currently generating about 0.16 per unit of risk. If you would invest  2,038  in Pace Large Value on October 26, 2024 and sell it today you would earn a total of  75.00  from holding Pace Large Value or generate 3.68% return on investment over 90 days.

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

Pace Large Value  vs.  Great West Lifetime 2020

Pace Large Value

Risk-Adjusted Performance

0 of 100

Very Weak

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

Great West Lifetime

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Lifetime 2020 are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Great-west Lifetime is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pace Large and Great-west Lifetime

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

The idea behind Pace Large Value and Great West Lifetime 2020 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.