Correlation Between North American and Great West
Can any of the company-specific risk be diversified away by investing in both North American 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 North American and Great West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Financial and Great West Lifeco, you can compare the effects of market volatilities on North American 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 North American with a short position of Great West. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Great West.
Diversification Opportunities for North American and Great West
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between North and Great is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding North American Financial and Great West Lifeco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifeco and North American 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 North American Financial 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 Lifeco has no effect on the direction of North American i.e., North American and Great West go up and down completely randomly.
Pair Corralation between North American and Great West
Assuming the 90 days trading horizon North American Financial is expected to generate 3.16 times more return on investment than Great West. However, North American is 3.16 times more volatile than Great West Lifeco. It trades about 0.05 of its potential returns per unit of risk. Great West Lifeco is currently generating about 0.04 per unit of risk. If you would invest 457.00 in North American Financial on November 19, 2024 and sell it today you would earn a total of 239.00 from holding North American Financial or generate 52.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Financial vs. Great West Lifeco
Performance |
| Timeline |
| North American Financial |
| Great West Lifeco |
North American and Great West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and Great West
The main advantage of trading using opposite North American and Great West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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.| North American vs. Dividend Growth Split | North American vs. Dividend 15 Split | North American vs. Financial 15 Split | North American vs. Dividend 15 Split |
| Great West vs. Broadcom | Great West vs. Partners Value Investments | Great West vs. Solid Impact Investments | Great West vs. Canaf Investments |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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