Correlation Between GE Aerospace and Goldman Sachs

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

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

Diversification Opportunities for GE Aerospace and Goldman Sachs

0.79

Correlation Coefficient

GE Aerospace  Goldman Sachs

Poor diversification

The 3 months correlation between GE Aerospace and Goldman is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Goldman Sachs Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Global and GE Aerospace 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 GE Aerospace 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 Global has no effect on the direction of GE Aerospace i.e., GE Aerospace and Goldman Sachs go up and down completely randomly.

Pair Corralation between GE Aerospace and Goldman Sachs

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 1.37 times more return on investment than Goldman Sachs. However, GE Aerospace is 1.37 times more volatile than Goldman Sachs Global. It trades about 0.03 of its potential returns per unit of risk. Goldman Sachs Global is currently generating about -0.2 per unit of risk. If you would invest  17,104  in GE Aerospace on October 9, 2024 and sell it today you would earn a total of  127.00  from holding GE Aerospace or generate 0.74% return on investment over 90 days.

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

GE Aerospace  vs.  Goldman Sachs Global

GE Aerospace

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GE Aerospace has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 latest weak performance, the Fund's basic 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 GE Aerospace and Goldman Sachs

The main advantage of trading using opposite GE Aerospace and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace 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 GE Aerospace and Goldman Sachs Global 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.