Correlation Between Avadel Pharmaceuticals and Goldman Sachs

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

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

Diversification Opportunities for Avadel Pharmaceuticals and Goldman Sachs

-0.09

Correlation Coefficient

Avadel Pharmaceuticals  Goldman Sachs

Good diversification

The 3 months correlation between Avadel and Goldman is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Avadel Pharmaceuticals PLC and Goldman Sachs Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Capital and Avadel Pharmaceuticals 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 Avadel Pharmaceuticals PLC 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 Capital has no effect on the direction of Avadel Pharmaceuticals i.e., Avadel Pharmaceuticals and Goldman Sachs go up and down completely randomly.

Pair Corralation between Avadel Pharmaceuticals and Goldman Sachs

Given the investment horizon of 90 days Avadel Pharmaceuticals PLC is expected to under-perform the Goldman Sachs. In addition to that, Avadel Pharmaceuticals is 8.98 times more volatile than Goldman Sachs Capital. It trades about -0.18 of its total potential returns per unit of risk. Goldman Sachs Capital is currently generating about -0.34 per unit of volatility. If you would invest  2,750  in Goldman Sachs Capital on October 20, 2024 and sell it today you would lose (127.00) from holding Goldman Sachs Capital or give up 4.62% of portfolio value over 90 days.

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

Avadel Pharmaceuticals PLC  vs.  Goldman Sachs Capital

Avadel Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avadel Pharmaceuticals PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Goldman Sachs Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Goldman Sachs is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Avadel Pharmaceuticals and Goldman Sachs

The main advantage of trading using opposite Avadel Pharmaceuticals and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avadel Pharmaceuticals 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 Avadel Pharmaceuticals PLC and Goldman Sachs Capital 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.