Correlation Between Algorand and Goldman Sachs

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

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

Diversification Opportunities for Algorand and Goldman Sachs

0.24

Correlation Coefficient

Algorand  Goldman Sachs

Modest diversification

The 3 months correlation between Algorand and Goldman is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Algorand and Goldman Sachs ActiveBeta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs ActiveBeta and Algorand 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 Algorand 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 ActiveBeta has no effect on the direction of Algorand i.e., Algorand and Goldman Sachs go up and down completely randomly.

Pair Corralation between Algorand and Goldman Sachs

Assuming the 90 days trading horizon Algorand is expected to generate 6.82 times more return on investment than Goldman Sachs. However, Algorand is 6.82 times more volatile than Goldman Sachs ActiveBeta. It trades about 0.09 of its potential returns per unit of risk. Goldman Sachs ActiveBeta is currently generating about 0.05 per unit of risk. If you would invest  19.00  in Algorand on October 27, 2024 and sell it today you would earn a total of  21.00  from holding Algorand or generate 110.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	57.79%
Values	Daily Returns

Algorand  vs.  Goldman Sachs ActiveBeta

Algorand

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Algorand are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Algorand exhibited solid returns over the last few months and may actually be approaching a breakup point.

Goldman Sachs ActiveBeta

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs ActiveBeta are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking indicators, Goldman Sachs is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Algorand and Goldman Sachs

The main advantage of trading using opposite Algorand and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algorand 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 Algorand and Goldman Sachs ActiveBeta 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.