Correlation Between Goldman Sachs and Ultrashort Dow

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

By analyzing existing cross correlation between Goldman Sachs Global and Ultrashort Dow 30, you can compare the effects of market volatilities on Goldman Sachs and Ultrashort Dow 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 Goldman Sachs with a short position of Ultrashort Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and Ultrashort Dow.

Diversification Opportunities for Goldman Sachs and Ultrashort Dow

-0.5

Correlation Coefficient

Goldman Sachs  Ultrashort Dow

Very good diversification

The 3 months correlation between GOLDMAN and Ultrashort is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Global and Ultrashort Dow 30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort Dow 30 and Goldman Sachs 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 Goldman Sachs Global are associated (or correlated) with Ultrashort Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort Dow 30 has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Ultrashort Dow go up and down completely randomly.

Pair Corralation between Goldman Sachs and Ultrashort Dow

Assuming the 90 days horizon Goldman Sachs Global is expected to generate 0.21 times more return on investment than Ultrashort Dow. However, Goldman Sachs Global is 4.72 times less risky than Ultrashort Dow. It trades about 0.06 of its potential returns per unit of risk. Ultrashort Dow 30 is currently generating about -0.07 per unit of risk. If you would invest  1,059  in Goldman Sachs Global on October 4, 2024 and sell it today you would earn a total of  68.00  from holding Goldman Sachs Global or generate 6.42% return on investment over 90 days.

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

Goldman Sachs Global  vs.  Ultrashort Dow 30

Goldman Sachs Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Global 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.

Ultrashort Dow 30

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultrashort Dow 30 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ultrashort Dow is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Goldman Sachs and Ultrashort Dow

The main advantage of trading using opposite Goldman Sachs and Ultrashort Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goldman Sachs position performs unexpectedly, Ultrashort Dow 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 Ultrashort Dow will offset losses from the drop in Ultrashort Dow's long position.

The idea behind Goldman Sachs Global and Ultrashort Dow 30 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.