Correlation Between Great-west and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Great-west and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great West Sp 500 and Dow Jones Industrial, you can compare the effects of market volatilities on Great-west and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great-west and Dow Jones.
Diversification Opportunities for Great-west and Dow Jones
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Great-west and Dow is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Great West Sp 500 and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Sp 500 are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Great-west i.e., Great-west and Dow Jones go up and down completely randomly.
Pair Corralation between Great-west and Dow Jones
Assuming the 90 days horizon Great West Sp 500 is expected to generate 1.14 times more return on investment than Dow Jones. However, Great-west is 1.14 times more volatile than Dow Jones Industrial. It trades about 0.11 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 2,540 in Great West Sp 500 on September 3, 2024 and sell it today you would earn a total of 1,322 from holding Great West Sp 500 or generate 52.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great West Sp 500 vs. Dow Jones Industrial
Performance |
| Timeline |
Great-west and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Great West Sp 500
Pair trading matchups for Great-west
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Great-west and Dow Jones
The main advantage of trading using opposite Great-west and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great-west position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Great-west vs. T Rowe Price | Great-west vs. John Hancock Funds | Great-west vs. Virtus Dfa 2040 | Great-west vs. Hood River New |
| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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