Correlation Between Pace Large and Great West

Can any of the company-specific risk be diversified away by investing in both Pace Large and Great West 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 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 2060, you can compare the effects of market volatilities on Pace Large and Great West 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Large and Great West.

Diversification Opportunities for Pace Large and Great West

0.83

Correlation Coefficient

Pace Large  Great West

Very poor diversification

The 3 months correlation between Pace and Great is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Pace Large Value and Great West Lifetime 2060 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. 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 go up and down completely randomly.

Pair Corralation between Pace Large and Great West

Assuming the 90 days horizon Pace Large is expected to generate 1.06 times less return on investment than Great West. In addition to that, Pace Large is 1.08 times more volatile than Great West Lifetime 2060. It trades about 0.04 of its total potential returns per unit of risk. Great West Lifetime 2060 is currently generating about 0.04 per unit of volatility. If you would invest  968.00  in Great West Lifetime 2060 on October 24, 2024 and sell it today you would earn a total of  142.00  from holding Great West Lifetime 2060 or generate 14.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Pace Large Value  vs.  Great West Lifetime 2060

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

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Lifetime 2060 are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Great West 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

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

The idea behind Pace Large Value and Great West Lifetime 2060 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.