Correlation Between State Bank and Great-West Lifeco

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

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

Diversification Opportunities for State Bank and Great-West Lifeco

0.61

Correlation Coefficient

State Bank  Great-West Lifeco

Poor diversification

The 3 months correlation between State and Great-West is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Great West Lifeco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifeco and State Bank 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 State Bank of are associated (or correlated) with Great-West Lifeco. 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 Lifeco has no effect on the direction of State Bank i.e., State Bank and Great-West Lifeco go up and down completely randomly.

Pair Corralation between State Bank and Great-West Lifeco

Assuming the 90 days horizon State Bank of is expected to under-perform the Great-West Lifeco. In addition to that, State Bank is 1.08 times more volatile than Great West Lifeco. It trades about -0.35 of its total potential returns per unit of risk. Great West Lifeco is currently generating about -0.18 per unit of volatility. If you would invest  3,280  in Great West Lifeco on October 7, 2024 and sell it today you would lose (120.00) from holding Great West Lifeco or give up 3.66% of portfolio value over 90 days.

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

State Bank of  vs.  Great West Lifeco

State Bank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in State Bank of are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, State Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Great West Lifeco

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Lifeco are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Great-West Lifeco is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with State Bank and Great-West Lifeco

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

The idea behind State Bank of and Great West Lifeco 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.