Correlation Between Great-west Lifetime and Great-west Conservative
Can any of the company-specific risk be diversified away by investing in both Great-west Lifetime and Great-west Conservative 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 Lifetime and Great-west Conservative into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great West Lifetime 2020 and Great West Servative Profile, you can compare the effects of market volatilities on Great-west Lifetime and Great-west Conservative 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 Lifetime with a short position of Great-west Conservative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great-west Lifetime and Great-west Conservative.
Diversification Opportunities for Great-west Lifetime and Great-west Conservative
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Great-west and Great-west is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Great West Lifetime 2020 and Great West Servative Profile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great-west Conservative and Great-west Lifetime 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 Lifetime 2020 are associated (or correlated) with Great-west Conservative. 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 Conservative has no effect on the direction of Great-west Lifetime i.e., Great-west Lifetime and Great-west Conservative go up and down completely randomly.
Pair Corralation between Great-west Lifetime and Great-west Conservative
Assuming the 90 days horizon Great West Lifetime 2020 is expected to generate 1.26 times more return on investment than Great-west Conservative. However, Great-west Lifetime is 1.26 times more volatile than Great West Servative Profile. It trades about 0.06 of its potential returns per unit of risk. Great West Servative Profile is currently generating about 0.05 per unit of risk. If you would invest 950.00 in Great West Lifetime 2020 on September 3, 2024 and sell it today you would earn a total of 125.00 from holding Great West Lifetime 2020 or generate 13.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great West Lifetime 2020 vs. Great West Servative Profile
Performance |
| Timeline |
| Great West Lifetime |
| Great-west Conservative |
Great-west Lifetime and Great-west Conservative Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great-west Lifetime and Great-west Conservative
The main advantage of trading using opposite Great-west Lifetime and Great-west Conservative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great-west Lifetime position performs unexpectedly, Great-west Conservative 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 Conservative will offset losses from the drop in Great-west Conservative's long position.The idea behind Great West Lifetime 2020 and Great West Servative Profile 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.
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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