Correlation Between Goldman Sachs and Dreyfus Municipal

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

By analyzing existing cross correlation between Goldman Sachs Enhanced and Dreyfus Municipal Bond, you can compare the effects of market volatilities on Goldman Sachs and Dreyfus Municipal 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 Dreyfus Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and Dreyfus Municipal.

Diversification Opportunities for Goldman Sachs and Dreyfus Municipal

0.34

Correlation Coefficient

Goldman Sachs  Dreyfus Municipal

Weak diversification

The 3 months correlation between Goldman and Dreyfus is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Enhanced and Dreyfus Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Municipal Bond 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 Enhanced are associated (or correlated) with Dreyfus Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Municipal Bond has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Dreyfus Municipal go up and down completely randomly.

Pair Corralation between Goldman Sachs and Dreyfus Municipal

Assuming the 90 days horizon Goldman Sachs Enhanced is expected to generate 0.21 times more return on investment than Dreyfus Municipal. However, Goldman Sachs Enhanced is 4.68 times less risky than Dreyfus Municipal. It trades about 0.23 of its potential returns per unit of risk. Dreyfus Municipal Bond is currently generating about -0.05 per unit of risk. If you would invest  945.00  in Goldman Sachs Enhanced on December 21, 2024 and sell it today you would earn a total of  11.00  from holding Goldman Sachs Enhanced or generate 1.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Goldman Sachs Enhanced  vs.  Dreyfus Municipal Bond

Goldman Sachs Enhanced

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Enhanced are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. 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.

Dreyfus Municipal Bond

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dreyfus Municipal Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Dreyfus Municipal 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 Dreyfus Municipal

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

The idea behind Goldman Sachs Enhanced and Dreyfus Municipal Bond 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.