Correlation Between Great West and Aviva PLC

Can any of the company-specific risk be diversified away by investing in both Great West and Aviva PLC 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 Aviva PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Great West Lifeco and Aviva PLC ADR, you can compare the effects of market volatilities on Great West and Aviva PLC 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 Aviva PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great West and Aviva PLC.

Diversification Opportunities for Great West and Aviva PLC

-0.35

Correlation Coefficient

Great West  Aviva PLC

Very good diversification

The 3 months correlation between Great and Aviva is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Great West Lifeco and Aviva PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aviva PLC ADR 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 Lifeco are associated (or correlated) with Aviva PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aviva PLC ADR has no effect on the direction of Great West i.e., Great West and Aviva PLC go up and down completely randomly.

Pair Corralation between Great West and Aviva PLC

If you would invest  1,040  in Aviva PLC ADR on September 23, 2024 and sell it today you would earn a total of  0.00  from holding Aviva PLC ADR or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Great West Lifeco  vs.  Aviva PLC ADR

Great West Lifeco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great West Lifeco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Great West is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Aviva PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aviva PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Aviva PLC 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 and Aviva PLC

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

The idea behind Great West Lifeco and Aviva PLC ADR 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.