Correlation Between Great-west Inflation-protec and Great-west
Can any of the company-specific risk be diversified away by investing in both Great-west Inflation-protec and Great-west 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 Great-west 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 Great West Government Mortgage, you can compare the effects of market volatilities on Great-west Inflation-protec and Great-west 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 Great-west. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great-west Inflation-protec and Great-west.
Diversification Opportunities for Great-west Inflation-protec and Great-west
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Great-west and Great-west is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Great West Inflation Protected and Great West Government Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Government 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 Great-west. 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 Government has no effect on the direction of Great-west Inflation-protec i.e., Great-west Inflation-protec and Great-west go up and down completely randomly.
Pair Corralation between Great-west Inflation-protec and Great-west
Assuming the 90 days horizon Great West Inflation Protected Securities is expected to generate 0.65 times more return on investment than Great-west. However, Great West Inflation Protected Securities is 1.55 times less risky than Great-west. It trades about 0.06 of its potential returns per unit of risk. Great West Government Mortgage is currently generating about 0.02 per unit of risk. If you would invest 852.00 in Great West Inflation Protected Securities on August 28, 2024 and sell it today you would earn a total of 67.00 from holding Great West Inflation Protected Securities or generate 7.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great West Inflation Protected vs. Great West Government Mortgage
Performance |
| Timeline |
| Great-west Inflation-protec |
| Great West Government |
Great-west Inflation-protec and Great-west Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great-west Inflation-protec and Great-west
The main advantage of trading using opposite Great-west Inflation-protec and Great-west positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great-west Inflation-protec position performs unexpectedly, Great-west 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 will offset losses from the drop in Great-west's long position.The idea behind Great West Inflation Protected Securities and Great West Government Mortgage 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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