Correlation Between Rational Strategic and Great West

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

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

Diversification Opportunities for Rational Strategic and Great West

0.85

Correlation Coefficient

Rational Strategic  Great West

Very poor diversification

The 3 months correlation between Rational and Great is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Rational Strategic Allocation 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 Rational Strategic 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 Rational Strategic Allocation 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 Rational Strategic i.e., Rational Strategic and Great West go up and down completely randomly.

Pair Corralation between Rational Strategic and Great West

Assuming the 90 days horizon Rational Strategic Allocation is expected to under-perform the Great West. In addition to that, Rational Strategic is 3.03 times more volatile than Great West Lifetime 2020. It trades about -0.23 of its total potential returns per unit of risk. Great West Lifetime 2020 is currently generating about -0.33 per unit of volatility. If you would invest  1,093  in Great West Lifetime 2020 on October 7, 2024 and sell it today you would lose (56.00) from holding Great West Lifetime 2020 or give up 5.12% of portfolio value over 90 days.

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

Rational Strategic Allocation  vs.  Great West Lifetime 2020

Rational Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rational Strategic Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Rational Strategic 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

0 of 100

Very Weak

Over the last 90 days Great West Lifetime 2020 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical 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 Rational Strategic and Great West

The main advantage of trading using opposite Rational Strategic and Great West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rational Strategic 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 Rational Strategic Allocation 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.