Correlation Between Inflation-adjusted and Goldman Sachs

Can any of the company-specific risk be diversified away by investing in both Inflation-adjusted 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 Inflation-adjusted and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Inflation Adjusted Bond Fund and Goldman Sachs Enhanced, you can compare the effects of market volatilities on Inflation-adjusted 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 Inflation-adjusted with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inflation-adjusted and Goldman Sachs.

Diversification Opportunities for Inflation-adjusted and Goldman Sachs

0.92

Correlation Coefficient

Inflation-adjusted  Goldman Sachs

Almost no diversification

The 3 months correlation between Inflation-adjusted and Goldman is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Inflation Adjusted Bond Fund and Goldman Sachs Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Enhanced and Inflation-adjusted 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 Inflation Adjusted Bond Fund 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 Enhanced has no effect on the direction of Inflation-adjusted i.e., Inflation-adjusted and Goldman Sachs go up and down completely randomly.

Pair Corralation between Inflation-adjusted and Goldman Sachs

Assuming the 90 days horizon Inflation Adjusted Bond Fund is expected to generate 3.3 times more return on investment than Goldman Sachs. However, Inflation-adjusted is 3.3 times more volatile than Goldman Sachs Enhanced. It trades about 0.18 of its potential returns per unit of risk. Goldman Sachs Enhanced is currently generating about 0.21 per unit of risk. If you would invest  1,032  in Inflation Adjusted Bond Fund on December 25, 2024 and sell it today you would earn a total of  30.00  from holding Inflation Adjusted Bond Fund or generate 2.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.33%
Values	Daily Returns

Inflation Adjusted Bond Fund  vs.  Goldman Sachs Enhanced

Inflation Adjusted Bond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Inflation Adjusted Bond Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Inflation-adjusted is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs Enhanced

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Enhanced are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Inflation-adjusted and Goldman Sachs

The main advantage of trading using opposite Inflation-adjusted and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inflation-adjusted 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.

The idea behind Inflation Adjusted Bond Fund and Goldman Sachs Enhanced 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.