Correlation Between Essex Environmental and Goldman Sachs

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

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

Diversification Opportunities for Essex Environmental and Goldman Sachs

-0.24

Correlation Coefficient

Essex Environmental  Goldman Sachs

Very good diversification

The 3 months correlation between Essex and GOLDMAN is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Essex Environmental Opportunit and Goldman Sachs Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Short and Essex Environmental 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 Essex Environmental Opportunities 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 Short has no effect on the direction of Essex Environmental i.e., Essex Environmental and Goldman Sachs go up and down completely randomly.

Pair Corralation between Essex Environmental and Goldman Sachs

Assuming the 90 days horizon Essex Environmental Opportunities is expected to generate 9.48 times more return on investment than Goldman Sachs. However, Essex Environmental is 9.48 times more volatile than Goldman Sachs Short. It trades about 0.14 of its potential returns per unit of risk. Goldman Sachs Short is currently generating about 0.03 per unit of risk. If you would invest  1,332  in Essex Environmental Opportunities on September 3, 2024 and sell it today you would earn a total of  126.00  from holding Essex Environmental Opportunities or generate 9.46% return on investment over 90 days.

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

Essex Environmental Opportunit  vs.  Goldman Sachs Short

Essex Environmental

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Essex Environmental Opportunities are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Essex Environmental may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Goldman Sachs Short

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Short are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Goldman Sachs is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Essex Environmental and Goldman Sachs

The main advantage of trading using opposite Essex Environmental and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Essex Environmental 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 Essex Environmental Opportunities and Goldman Sachs Short 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.