Correlation Between Great West and Small Cap
Can any of the company-specific risk be diversified away by investing in both Great West and Small Cap 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 Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great West Loomis Sayles and Small Cap Value, you can compare the effects of market volatilities on Great West and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great West and Small Cap.
Diversification Opportunities for Great West and Small Cap
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Great and Small is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Great West Loomis Sayles and Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value 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 Loomis Sayles are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Value has no effect on the direction of Great West i.e., Great West and Small Cap go up and down completely randomly.
Pair Corralation between Great West and Small Cap
Assuming the 90 days horizon Great West is expected to generate 1.08 times less return on investment than Small Cap. In addition to that, Great West is 1.0 times more volatile than Small Cap Value. It trades about 0.06 of its total potential returns per unit of risk. Small Cap Value is currently generating about 0.06 per unit of volatility. If you would invest 1,555 in Small Cap Value on September 12, 2024 and sell it today you would earn a total of 370.00 from holding Small Cap Value or generate 23.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.7% |
| Values | Daily Returns |
Great West Loomis Sayles vs. Small Cap Value
Performance |
| Timeline |
| Great West Loomis |
| Small Cap Value |
Great West and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great West and Small Cap
The main advantage of trading using opposite Great West and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great West position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Great West vs. Vanguard Small Cap Value | Great West vs. Vanguard Small Cap Value | Great West vs. Us Small Cap | Great West vs. Us Targeted Value |
| Small Cap vs. Royce Opportunity Fund | Small Cap vs. Great West Loomis Sayles | Small Cap vs. Valic Company I | Small Cap vs. Mutual Of America |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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