Correlation Between California Bond and Great-west Lifetime

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

By analyzing existing cross correlation between California Bond Fund and Great West Lifetime 2050, you can compare the effects of market volatilities on California Bond and Great-west Lifetime 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 California Bond with a short position of Great-west Lifetime. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Great-west Lifetime.

Diversification Opportunities for California Bond and Great-west Lifetime

0.67

Correlation Coefficient

California Bond  Great-west Lifetime

Poor diversification

The 3 months correlation between California and Great-west is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Great West Lifetime 2050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifetime and California Bond 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 California Bond Fund are associated (or correlated) with Great-west Lifetime. 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 California Bond i.e., California Bond and Great-west Lifetime go up and down completely randomly.

Pair Corralation between California Bond and Great-west Lifetime

Assuming the 90 days horizon California Bond is expected to generate 43.2 times less return on investment than Great-west Lifetime. But when comparing it to its historical volatility, California Bond Fund is 2.91 times less risky than Great-west Lifetime. It trades about 0.0 of its potential returns per unit of risk. Great West Lifetime 2050 is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,158  in Great West Lifetime 2050 on October 26, 2024 and sell it today you would earn a total of  12.00  from holding Great West Lifetime 2050 or generate 1.04% return on investment over 90 days.

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

California Bond Fund  vs.  Great West Lifetime 2050

California Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days California Bond Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, California Bond 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 2050 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 Lifetime is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with California Bond and Great-west Lifetime

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

The idea behind California Bond Fund and Great West Lifetime 2050 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.

Check out your portfolio center.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .