Correlation Between Great-west Inflation-protec and The Emerging
Can any of the company-specific risk be diversified away by investing in both Great-west Inflation-protec and The Emerging 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 Inflation-protec and The Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great West Inflation Protected Securities and The Emerging Markets, you can compare the effects of market volatilities on Great-west Inflation-protec and The Emerging 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 Inflation-protec with a short position of The Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great-west Inflation-protec and The Emerging.
Diversification Opportunities for Great-west Inflation-protec and The Emerging
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Great-west and The is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Great West Inflation Protected and The Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets and Great-west Inflation-protec 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 Inflation Protected Securities are associated (or correlated) with The Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets has no effect on the direction of Great-west Inflation-protec i.e., Great-west Inflation-protec and The Emerging go up and down completely randomly.
Pair Corralation between Great-west Inflation-protec and The Emerging
Assuming the 90 days horizon Great-west Inflation-protec is expected to generate 2.01 times less return on investment than The Emerging. But when comparing it to its historical volatility, Great West Inflation Protected Securities is 2.93 times less risky than The Emerging. It trades about 0.05 of its potential returns per unit of risk. The Emerging Markets is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,644 in The Emerging Markets on September 3, 2024 and sell it today you would earn a total of 223.00 from holding The Emerging Markets or generate 13.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great West Inflation Protected vs. The Emerging Markets
Performance |
| Timeline |
| Great-west Inflation-protec |
| Emerging Markets |
Great-west Inflation-protec and The Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great-west Inflation-protec and The Emerging
The main advantage of trading using opposite Great-west Inflation-protec and The Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great-west Inflation-protec position performs unexpectedly, The Emerging 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 The Emerging will offset losses from the drop in The Emerging's long position.The idea behind Great West Inflation Protected Securities and The Emerging Markets 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.
| The Emerging vs. Vanguard Total Stock | The Emerging vs. Vanguard 500 Index | The Emerging vs. Vanguard Total Stock | The Emerging vs. Vanguard Total Stock |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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