Correlation Between Vanguard Health and Great West

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

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

Diversification Opportunities for Vanguard Health and Great West

0.63

Correlation Coefficient

Vanguard Health  Great West

Poor diversification

The 3 months correlation between Vanguard and Great is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Health Care 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 Vanguard Health 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 Vanguard Health Care 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 Vanguard Health i.e., Vanguard Health and Great West go up and down completely randomly.

Pair Corralation between Vanguard Health and Great West

Assuming the 90 days horizon Vanguard Health Care is expected to generate 2.11 times more return on investment than Great West. However, Vanguard Health is 2.11 times more volatile than Great West Lifetime 2020. It trades about 0.08 of its potential returns per unit of risk. Great West Lifetime 2020 is currently generating about 0.1 per unit of risk. If you would invest  18,422  in Vanguard Health Care on October 24, 2024 and sell it today you would earn a total of  226.00  from holding Vanguard Health Care or generate 1.23% return on investment over 90 days.

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

Vanguard Health Care  vs.  Great West Lifetime 2020

Vanguard Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Health Care has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund 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 forward-looking signals, 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 Vanguard Health and Great West

The main advantage of trading using opposite Vanguard Health and Great West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Health 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 Vanguard Health Care 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.