Correlation Between Financial Industries and Great-west Lifetime
Can any of the company-specific risk be diversified away by investing in both Financial Industries and Great-west Lifetime 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 Financial Industries and Great-west Lifetime into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Industries Fund and Great West Lifetime 2025, you can compare the effects of market volatilities on Financial Industries and Great-west Lifetime 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 Financial Industries with a short position of Great-west Lifetime. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Industries and Great-west Lifetime.
Diversification Opportunities for Financial Industries and Great-west Lifetime
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Financial and Great-west is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund and Great West Lifetime 2025 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifetime and Financial Industries 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 Financial Industries Fund are associated (or correlated) with Great-west Lifetime. 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 Financial Industries i.e., Financial Industries and Great-west Lifetime go up and down completely randomly.
Pair Corralation between Financial Industries and Great-west Lifetime
Assuming the 90 days horizon Financial Industries Fund is expected to under-perform the Great-west Lifetime. In addition to that, Financial Industries is 2.2 times more volatile than Great West Lifetime 2025. It trades about -0.1 of its total potential returns per unit of risk. Great West Lifetime 2025 is currently generating about -0.03 per unit of volatility. If you would invest 1,413 in Great West Lifetime 2025 on December 3, 2024 and sell it today you would lose (17.00) from holding Great West Lifetime 2025 or give up 1.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial Industries Fund vs. Great West Lifetime 2025
Performance |
| Timeline |
| Financial Industries |
| Great West Lifetime |
Financial Industries and Great-west Lifetime Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Industries and Great-west Lifetime
The main advantage of trading using opposite Financial Industries and Great-west Lifetime positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Industries position performs unexpectedly, Great-west Lifetime 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 Lifetime will offset losses from the drop in Great-west Lifetime's long position.| Financial Industries vs. Simt High Yield | ||
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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