Correlation Between Goldman Sachs and Great-west Real

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

By analyzing existing cross correlation between Goldman Sachs Clean and Great West Real Estate, you can compare the effects of market volatilities on Goldman Sachs and Great-west Real 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 Great-west Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and Great-west Real.

Diversification Opportunities for Goldman Sachs and Great-west Real

0.87

Correlation Coefficient

Goldman Sachs  Great-west Real

Very poor diversification

The 3 months correlation between Goldman and Great-west is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Clean and Great West Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Real 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 Clean are associated (or correlated) with Great-west Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Real has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Great-west Real go up and down completely randomly.

Pair Corralation between Goldman Sachs and Great-west Real

Assuming the 90 days horizon Goldman Sachs Clean is expected to generate 0.84 times more return on investment than Great-west Real. However, Goldman Sachs Clean is 1.19 times less risky than Great-west Real. It trades about -0.1 of its potential returns per unit of risk. Great West Real Estate is currently generating about -0.11 per unit of risk. If you would invest  889.00  in Goldman Sachs Clean on November 29, 2024 and sell it today you would lose (51.00) from holding Goldman Sachs Clean or give up 5.74% of portfolio value over 90 days.

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

Goldman Sachs Clean  vs.  Great West Real Estate

Goldman Sachs Clean

Risk-Adjusted Performance

Very Weak

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

Great West Real

Risk-Adjusted Performance

Very Weak

Over the last 90 days Great West Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Goldman Sachs and Great-west Real

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

The idea behind Goldman Sachs Clean and Great West Real Estate 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.