Correlation Between Great Wes and Power Financial
Can any of the company-specific risk be diversified away by investing in both Great Wes and Power Financial 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 Great Wes and Power Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Wes 515 and Power Financial 51, you can compare the effects of market volatilities on Great Wes and Power Financial 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 Great Wes with a short position of Power Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wes and Power Financial.
Diversification Opportunities for Great Wes and Power Financial
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Great and Power is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Great Wes 515 and Power Financial 51 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Financial 51 and Great Wes 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 Great Wes 515 are associated (or correlated) with Power Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Financial 51 has no effect on the direction of Great Wes i.e., Great Wes and Power Financial go up and down completely randomly.
Pair Corralation between Great Wes and Power Financial
Assuming the 90 days trading horizon Great Wes 515 is expected to generate 0.9 times more return on investment than Power Financial. However, Great Wes 515 is 1.11 times less risky than Power Financial. It trades about 0.05 of its potential returns per unit of risk. Power Financial 51 is currently generating about 0.03 per unit of risk. If you would invest 1,896 in Great Wes 515 on August 29, 2024 and sell it today you would earn a total of 236.00 from holding Great Wes 515 or generate 12.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great Wes 515 vs. Power Financial 51
Performance |
| Timeline |
| Great Wes 515 |
| Power Financial 51 |
Great Wes and Power Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Wes and Power Financial
The main advantage of trading using opposite Great Wes and Power Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Wes position performs unexpectedly, Power Financial 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 Power Financial will offset losses from the drop in Power Financial's long position.The idea behind Great Wes 515 and Power Financial 51 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.| Power Financial vs. Manulife Financial Corp | Power Financial vs. Great West Lifeco | Power Financial vs. Great West Lifeco |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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