Correlation Between Applied Finance and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Applied Finance and Goldman Sachs 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 Applied Finance and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Finance Explorer and Goldman Sachs Large, you can compare the effects of market volatilities on Applied Finance and Goldman Sachs 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 Applied Finance with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Finance and Goldman Sachs.
Diversification Opportunities for Applied Finance and Goldman Sachs
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Applied and Goldman is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Applied Finance Explorer and Goldman Sachs Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Large and Applied Finance 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 Applied Finance Explorer are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Large has no effect on the direction of Applied Finance i.e., Applied Finance and Goldman Sachs go up and down completely randomly.
Pair Corralation between Applied Finance and Goldman Sachs
Assuming the 90 days horizon Applied Finance Explorer is expected to generate 0.78 times more return on investment than Goldman Sachs. However, Applied Finance Explorer is 1.28 times less risky than Goldman Sachs. It trades about -0.04 of its potential returns per unit of risk. Goldman Sachs Large is currently generating about -0.12 per unit of risk. If you would invest 2,267 in Applied Finance Explorer on October 8, 2024 and sell it today you would lose (77.00) from holding Applied Finance Explorer or give up 3.4% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Applied Finance Explorer vs. Goldman Sachs Large
Performance |
Timeline |
Applied Finance Explorer |
Goldman Sachs Large |
Applied Finance and Goldman Sachs Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Applied Finance and Goldman Sachs
The main advantage of trading using opposite Applied Finance and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Finance position performs unexpectedly, Goldman Sachs 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 Goldman Sachs will offset losses from the drop in Goldman Sachs' long position.Applied Finance vs. Thrivent Small Cap | Applied Finance vs. Applied Finance Select | Applied Finance vs. Parnassus Endeavor Fund | Applied Finance vs. Queens Road Small |
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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