Correlation Between Great West and American Funds
Can any of the company-specific risk be diversified away by investing in both Great West and American Funds 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 American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great West Goldman Sachs and American Funds 2030, you can compare the effects of market volatilities on Great West and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great West and American Funds.
Diversification Opportunities for Great West and American Funds
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Great and American is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Great West Goldman Sachs and American Funds 2030 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2030 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 Goldman Sachs are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2030 has no effect on the direction of Great West i.e., Great West and American Funds go up and down completely randomly.
Pair Corralation between Great West and American Funds
Assuming the 90 days horizon Great West Goldman Sachs is expected to generate 1.73 times more return on investment than American Funds. However, Great West is 1.73 times more volatile than American Funds 2030. It trades about 0.06 of its potential returns per unit of risk. American Funds 2030 is currently generating about 0.02 per unit of risk. If you would invest 1,004 in Great West Goldman Sachs on September 12, 2024 and sell it today you would earn a total of 7.00 from holding Great West Goldman Sachs or generate 0.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great West Goldman Sachs vs. American Funds 2030
Performance |
| Timeline |
| Great West Goldman |
| American Funds 2030 |
Great West and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great West and American Funds
The main advantage of trading using opposite Great West and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great West position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Great West vs. Fm Investments Large | Great West vs. Pace Large Growth | Great West vs. T Rowe Price | Great West vs. Aqr Large Cap |
| American Funds vs. Goldman Sachs Government | American Funds vs. Ridgeworth Seix Government | American Funds vs. Us Government Securities | American Funds vs. Prudential Government Income |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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