Correlation Between Eaton Vance and Goldman Sachs

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

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

Diversification Opportunities for Eaton Vance and Goldman Sachs

0.8

Correlation Coefficient

Eaton Vance  Goldman Sachs

Very poor diversification

The 3 months correlation between Eaton and Goldman is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Vance Large Cap and Goldman Sachs Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Mid and Eaton Vance 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 Eaton Vance Large Cap 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 Mid has no effect on the direction of Eaton Vance i.e., Eaton Vance and Goldman Sachs go up and down completely randomly.

Pair Corralation between Eaton Vance and Goldman Sachs

Assuming the 90 days horizon Eaton Vance Large Cap is expected to generate 0.79 times more return on investment than Goldman Sachs. However, Eaton Vance Large Cap is 1.27 times less risky than Goldman Sachs. It trades about 0.01 of its potential returns per unit of risk. Goldman Sachs Mid is currently generating about -0.07 per unit of risk. If you would invest  2,527  in Eaton Vance Large Cap on December 29, 2024 and sell it today you would earn a total of  9.00  from holding Eaton Vance Large Cap or generate 0.36% return on investment over 90 days.

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

Eaton Vance Large Cap  vs.  Goldman Sachs Mid

Eaton Vance Large

Risk-Adjusted Performance

Weak

Over the last 90 days Eaton Vance Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Eaton Vance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goldman Sachs Mid has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic 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 Eaton Vance and Goldman Sachs

The main advantage of trading using opposite Eaton Vance and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton Vance 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 Eaton Vance Large Cap and Goldman Sachs Mid 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.