Correlation Between Power Financial and Great West
Can any of the company-specific risk be diversified away by investing in both Power Financial 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 Power Financial and Great West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Financial Corp and Great West Lifeco, you can compare the effects of market volatilities on Power Financial 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 Power Financial with a short position of Great West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Financial and Great West.
Diversification Opportunities for Power Financial and Great West
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Power and Great is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Power Financial Corp and Great West Lifeco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifeco and Power Financial 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 Power Financial Corp 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 Lifeco has no effect on the direction of Power Financial i.e., Power Financial and Great West go up and down completely randomly.
Pair Corralation between Power Financial and Great West
Assuming the 90 days trading horizon Power Financial Corp is expected to under-perform the Great West. In addition to that, Power Financial is 1.13 times more volatile than Great West Lifeco. It trades about -0.25 of its total potential returns per unit of risk. Great West Lifeco is currently generating about -0.27 per unit of volatility. If you would invest 2,181 in Great West Lifeco on August 25, 2024 and sell it today you would lose (62.00) from holding Great West Lifeco or give up 2.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Power Financial Corp vs. Great West Lifeco
Performance |
| Timeline |
| Power Financial Corp |
| Great West Lifeco |
Power Financial and Great West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power Financial and Great West
The main advantage of trading using opposite Power Financial and Great West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Financial 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.| Power Financial vs. Great West Lifeco | Power Financial vs. Power Financial Corp | Power Financial vs. Power Financial 51 | Power Financial vs. Intact Financial Corp |
| Great West vs. Aya Gold Silver | Great West vs. Capstone Mining Corp | Great West vs. Rocky Mountain Liquor | Great West vs. Data Communications Management |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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