Correlation Between Great-west Loomis and Northern Small

Can any of the company-specific risk be diversified away by investing in both Great-west Loomis and Northern Small 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 Loomis and Northern Small 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 Northern Small Cap, you can compare the effects of market volatilities on Great-west Loomis and Northern Small 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 Loomis with a short position of Northern Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great-west Loomis and Northern Small.

Diversification Opportunities for Great-west Loomis and Northern Small

0.91

Correlation Coefficient

Great-west Loomis  Northern Small

Almost no diversification

The 3 months correlation between Great-west and Northern is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Great West Loomis Sayles and Northern Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Small Cap and Great-west Loomis 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 Northern Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Small Cap has no effect on the direction of Great-west Loomis i.e., Great-west Loomis and Northern Small go up and down completely randomly.

Pair Corralation between Great-west Loomis and Northern Small

Assuming the 90 days horizon Great West Loomis Sayles is expected to generate 1.0 times more return on investment than Northern Small. However, Great West Loomis Sayles is 1.0 times less risky than Northern Small. It trades about 0.05 of its potential returns per unit of risk. Northern Small Cap is currently generating about 0.03 per unit of risk. If you would invest  2,986  in Great West Loomis Sayles on February 13, 2024 and sell it today you would earn a total of  771.00  from holding Great West Loomis Sayles or generate 25.82% 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 Loomis Sayles  vs.  Northern Small Cap

Great West Loomis

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Loomis Sayles are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Great-west Loomis may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Northern Small Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Small Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Northern Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Great-west Loomis and Northern Small

The main advantage of trading using opposite Great-west Loomis and Northern Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great-west Loomis position performs unexpectedly, Northern Small 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 Northern Small will offset losses from the drop in Northern Small's long position.

The idea behind Great West Loomis Sayles and Northern Small Cap 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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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.