Correlation Between Short Term and Great West

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

By analyzing existing cross correlation between Short Term Bond Fund and Great West Government Mortgage, you can compare the effects of market volatilities on Short Term 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 Short Term with a short position of Great West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Term and Great West.

Diversification Opportunities for Short Term and Great West

-0.14

Correlation Coefficient

Short Term  Great West

Good diversification

The 3 months correlation between Short and Great is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Bond Fund and Great West Government Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Government and Short Term 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 Short Term Bond Fund 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 Government has no effect on the direction of Short Term i.e., Short Term and Great West go up and down completely randomly.

Pair Corralation between Short Term and Great West

Assuming the 90 days horizon Short Term Bond Fund is expected to generate 0.16 times more return on investment than Great West. However, Short Term Bond Fund is 6.24 times less risky than Great West. It trades about 0.21 of its potential returns per unit of risk. Great West Government Mortgage is currently generating about 0.02 per unit of risk. If you would invest  946.00  in Short Term Bond Fund on October 27, 2024 and sell it today you would earn a total of  5.00  from holding Short Term Bond Fund or generate 0.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Short Term Bond Fund  vs.  Great West Government Mortgage

Short Term Bond

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Short Term Bond Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Short Term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Great West Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great West Government Mortgage has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary 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 Short Term and Great West

The main advantage of trading using opposite Short Term and Great West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Term 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 Short Term Bond Fund and Great West Government Mortgage 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.