Correlation Between Smallcap World and Great West
Can any of the company-specific risk be diversified away by investing in both Smallcap World 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 Smallcap World and Great West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap World Fund and Great West Lifetime 2050, you can compare the effects of market volatilities on Smallcap World 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 Smallcap World with a short position of Great West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and Great West.
Diversification Opportunities for Smallcap World and Great West
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Smallcap and Great is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World 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 Smallcap World 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 Smallcap World 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 Smallcap World i.e., Smallcap World and Great West go up and down completely randomly.
Pair Corralation between Smallcap World and Great West
Assuming the 90 days horizon Smallcap World Fund is expected to generate 1.05 times more return on investment than Great West. However, Smallcap World is 1.05 times more volatile than Great West Lifetime 2050. It trades about 0.03 of its potential returns per unit of risk. Great West Lifetime 2050 is currently generating about -0.01 per unit of risk. If you would invest 6,938 in Smallcap World Fund on October 24, 2024 and sell it today you would earn a total of 81.00 from holding Smallcap World Fund or generate 1.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smallcap World Fund vs. Great West Lifetime 2050
Performance |
| Timeline |
| Smallcap World |
| Great West Lifetime |
Smallcap World and Great West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap World and Great West
The main advantage of trading using opposite Smallcap World and Great West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap World 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.| Smallcap World vs. Qs Small Capitalization | Smallcap World vs. T Rowe Price | Smallcap World vs. Franklin Small Cap | Smallcap World vs. Needham Aggressive Growth |
| Great West vs. Transamerica High Yield | Great West vs. Artisan High Income | Great West vs. Msift High Yield | Great West vs. Fidelity Focused High |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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