Correlation Between World Energy and Great West
Can any of the company-specific risk be diversified away by investing in both World Energy 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 World Energy and Great West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Energy Fund and Great West Lifetime 2040, you can compare the effects of market volatilities on World Energy 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 World Energy with a short position of Great West. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and Great West.
Diversification Opportunities for World Energy and Great West
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between World and Great is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and Great West Lifetime 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifetime and World Energy 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 World Energy Fund 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 World Energy i.e., World Energy and Great West go up and down completely randomly.
Pair Corralation between World Energy and Great West
Assuming the 90 days horizon World Energy Fund is expected to under-perform the Great West. In addition to that, World Energy is 3.38 times more volatile than Great West Lifetime 2040. It trades about -0.02 of its total potential returns per unit of risk. Great West Lifetime 2040 is currently generating about 0.26 per unit of volatility. If you would invest 1,114 in Great West Lifetime 2040 on September 15, 2024 and sell it today you would earn a total of 21.00 from holding Great West Lifetime 2040 or generate 1.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Energy Fund vs. Great West Lifetime 2040
Performance |
| Timeline |
| World Energy |
| Great West Lifetime |
World Energy and Great West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Energy and Great West
The main advantage of trading using opposite World Energy and Great West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Energy 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.| World Energy vs. Jennison Natural Resources | World Energy vs. Icon Natural Resources | World Energy vs. Tortoise Energy Independence | World Energy vs. Clearbridge Energy Mlp |
| Great West vs. Hennessy Bp Energy | Great West vs. Gamco Natural Resources | Great West vs. Tortoise Energy Independence | Great West vs. World Energy Fund |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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