Correlation Between Great West and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Great West and Dow Jones 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 West and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great West Lifeco and Dow Jones Industrial, you can compare the effects of market volatilities on Great West and Dow Jones 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 West with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great West and Dow Jones.
Diversification Opportunities for Great West and Dow Jones
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Great and Dow is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Great West Lifeco and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Great West 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 West Lifeco are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Great West i.e., Great West and Dow Jones go up and down completely randomly.
Pair Corralation between Great West and Dow Jones
Assuming the 90 days trading horizon Great West Lifeco is expected to under-perform the Dow Jones. But the preferred stock apears to be less risky and, when comparing its historical volatility, Great West Lifeco is 1.65 times less risky than Dow Jones. The preferred stock trades about -0.05 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 4,109,142 in Dow Jones Industrial on August 28, 2024 and sell it today you would earn a total of 376,889 from holding Dow Jones Industrial or generate 9.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.88% |
| Values | Daily Returns |
Great West Lifeco vs. Dow Jones Industrial
Performance |
| Timeline |
Great West and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Great West Lifeco
Pair trading matchups for Great West
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Great West and Dow Jones
The main advantage of trading using opposite Great West and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great West position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Great West vs. Perseus Mining | Great West vs. Jamieson Wellness | Great West vs. T2 Metals Corp | Great West vs. Ramp Metals |
| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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