Correlation Between Great Wes and Power Financial

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

By analyzing existing cross correlation between Great Wes 515 and Power Financial Corp, you can compare the effects of market volatilities on Great Wes and Power Financial 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 Wes with a short position of Power Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wes and Power Financial.

Diversification Opportunities for Great Wes and Power Financial

0.87

Correlation Coefficient

Great Wes  Power Financial

Very poor diversification

The 3 months correlation between Great and Power is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Great Wes 515 and Power Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Financial Corp and Great Wes 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 Wes 515 are associated (or correlated) with Power Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Financial Corp has no effect on the direction of Great Wes i.e., Great Wes and Power Financial go up and down completely randomly.

Pair Corralation between Great Wes and Power Financial

Assuming the 90 days trading horizon Great Wes 515 is expected to under-perform the Power Financial. In addition to that, Great Wes is 1.2 times more volatile than Power Financial Corp. It trades about -0.1 of its total potential returns per unit of risk. Power Financial Corp is currently generating about -0.04 per unit of volatility. If you would invest  2,118  in Power Financial Corp on September 4, 2024 and sell it today you would lose (33.00) from holding Power Financial Corp or give up 1.56% of portfolio value over 90 days.

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

Great Wes 515  vs.  Power Financial Corp

Great Wes 515

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great Wes 515 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Great Wes is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Power Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Power Financial 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 Wes and Power Financial

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

The idea behind Great Wes 515 and Power Financial Corp 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.