Correlation Between International Equity and Great-west Real
Can any of the company-specific risk be diversified away by investing in both International Equity and Great-west Real 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 International Equity and Great-west Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Equity Institutional and Great West Real Estate, you can compare the effects of market volatilities on International Equity and Great-west Real 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 International Equity with a short position of Great-west Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equity and Great-west Real.
Diversification Opportunities for International Equity and Great-west Real
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between International and Great-west is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Instituti and Great West Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Real and International Equity 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 International Equity Institutional are associated (or correlated) with Great-west Real. 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 Real has no effect on the direction of International Equity i.e., International Equity and Great-west Real go up and down completely randomly.
Pair Corralation between International Equity and Great-west Real
Assuming the 90 days horizon International Equity is expected to generate 1.86 times less return on investment than Great-west Real. But when comparing it to its historical volatility, International Equity Institutional is 1.4 times less risky than Great-west Real. It trades about 0.09 of its potential returns per unit of risk. Great West Real Estate is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,008 in Great West Real Estate on September 4, 2024 and sell it today you would earn a total of 380.00 from holding Great West Real Estate or generate 37.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.63% |
| Values | Daily Returns |
International Equity Instituti vs. Great West Real Estate
Performance |
| Timeline |
| International Equity |
| Great West Real |
International Equity and Great-west Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Equity and Great-west Real
The main advantage of trading using opposite International Equity and Great-west Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equity position performs unexpectedly, Great-west Real 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 Real will offset losses from the drop in Great-west Real's long position.The idea behind International Equity Institutional and Great West Real Estate 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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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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