Correlation Between Great West and Davis Government

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

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

Diversification Opportunities for Great West and Davis Government

0.87

Correlation Coefficient

Great West  Davis Government

Very poor diversification

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

Pair Corralation between Great West and Davis Government

Assuming the 90 days horizon Great West Government Mortgage is expected to generate 2.16 times more return on investment than Davis Government. However, Great West is 2.16 times more volatile than Davis Government Bond. It trades about 0.09 of its potential returns per unit of risk. Davis Government Bond is currently generating about 0.09 per unit of risk. If you would invest  818.00  in Great West Government Mortgage on May 6, 2025 and sell it today you would earn a total of  13.00  from holding Great West Government Mortgage or generate 1.59% return on investment over 90 days.

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

Great West Government Mortgage  vs.  Davis Government Bond

Great West Government

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Government Mortgage are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Great West is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Davis Government Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Government Bond are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Davis Government 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 Davis Government

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

The idea behind Great West Government Mortgage and Davis Government Bond 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.