Correlation Between Extended Market and Great-west Moderately

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

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

Diversification Opportunities for Extended Market and Great-west Moderately

0.37

Correlation Coefficient

Extended Market  Great-west Moderately

Weak diversification

The 3 months correlation between Extended and Great-west is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index and Great West Moderately Aggressi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Moderately and Extended Market 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 Extended Market Index are associated (or correlated) with Great-west Moderately. 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 Moderately has no effect on the direction of Extended Market i.e., Extended Market and Great-west Moderately go up and down completely randomly.

Pair Corralation between Extended Market and Great-west Moderately

Assuming the 90 days horizon Extended Market Index is expected to under-perform the Great-west Moderately. In addition to that, Extended Market is 1.78 times more volatile than Great West Moderately Aggressive. It trades about -0.1 of its total potential returns per unit of risk. Great West Moderately Aggressive is currently generating about 0.05 per unit of volatility. If you would invest  698.00  in Great West Moderately Aggressive on December 23, 2024 and sell it today you would earn a total of  11.00  from holding Great West Moderately Aggressive or generate 1.58% return on investment over 90 days.

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

Extended Market Index  vs.  Great West Moderately Aggressi

Extended Market Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Extended Market Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Great West Moderately

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Moderately Aggressive are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Great-west Moderately is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Extended Market and Great-west Moderately

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

The idea behind Extended Market Index and Great West Moderately Aggressive 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.