Correlation Between Financial Services and Great-west Goldman

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

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

Diversification Opportunities for Financial Services and Great-west Goldman

0.68

Correlation Coefficient

Financial Services  Great-west Goldman

Poor diversification

The 3 months correlation between Financial and Great-west is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Financial Services Fund and Great West Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Goldman and Financial Services 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 Financial Services Fund are associated (or correlated) with Great-west Goldman. 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 Goldman has no effect on the direction of Financial Services i.e., Financial Services and Great-west Goldman go up and down completely randomly.

Pair Corralation between Financial Services and Great-west Goldman

Assuming the 90 days horizon Financial Services Fund is expected to under-perform the Great-west Goldman. But the mutual fund apears to be less risky and, when comparing its historical volatility, Financial Services Fund is 4.6 times less risky than Great-west Goldman. The mutual fund trades about -0.19 of its potential returns per unit of risk. The Great West Goldman Sachs is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,005  in Great West Goldman Sachs on October 8, 2024 and sell it today you would lose (32.00) from holding Great West Goldman Sachs or give up 3.18% of portfolio value over 90 days.

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

Financial Services Fund  vs.  Great West Goldman Sachs

Financial Services

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Financial Services Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Financial Services is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Great West Goldman

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Financial Services and Great-west Goldman

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

The idea behind Financial Services Fund and Great West Goldman Sachs 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.