Correlation Between Great-west Real and Franklin Arizona
Can any of the company-specific risk be diversified away by investing in both Great-west Real and Franklin Arizona 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 Real and Franklin Arizona into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great West Real Estate and Franklin Arizona Tax Free, you can compare the effects of market volatilities on Great-west Real and Franklin Arizona 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 Real with a short position of Franklin Arizona. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great-west Real and Franklin Arizona.
Diversification Opportunities for Great-west Real and Franklin Arizona
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Great-west and Franklin is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Great West Real Estate and Franklin Arizona Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Arizona Tax and Great-west Real 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 Real Estate are associated (or correlated) with Franklin Arizona. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Arizona Tax has no effect on the direction of Great-west Real i.e., Great-west Real and Franklin Arizona go up and down completely randomly.
Pair Corralation between Great-west Real and Franklin Arizona
Assuming the 90 days horizon Great West Real Estate is expected to generate 2.77 times more return on investment than Franklin Arizona. However, Great-west Real is 2.77 times more volatile than Franklin Arizona Tax Free. It trades about 0.16 of its potential returns per unit of risk. Franklin Arizona Tax Free is currently generating about 0.27 per unit of risk. If you would invest 1,225 in Great West Real Estate on November 29, 2024 and sell it today you would earn a total of 27.00 from holding Great West Real Estate or generate 2.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great West Real Estate vs. Franklin Arizona Tax Free
Performance |
| Timeline |
| Great West Real |
| Franklin Arizona Tax |
Great-west Real and Franklin Arizona Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great-west Real and Franklin Arizona
The main advantage of trading using opposite Great-west Real and Franklin Arizona positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great-west Real position performs unexpectedly, Franklin Arizona 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 Franklin Arizona will offset losses from the drop in Franklin Arizona's long position.The idea behind Great West Real Estate and Franklin Arizona Tax Free 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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