Correlation Between Goldman Sachs and Prudential Core

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

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

Diversification Opportunities for Goldman Sachs and Prudential Core

1.0

Correlation Coefficient

Goldman Sachs  Prudential Core

No risk reduction

The 3 months correlation between Goldman and Prudential is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Government and Prudential Core Conservative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Core Cons 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 Government are associated (or correlated) with Prudential Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Core Cons has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Prudential Core go up and down completely randomly.

Pair Corralation between Goldman Sachs and Prudential Core

Assuming the 90 days horizon Goldman Sachs Government is expected to generate 0.97 times more return on investment than Prudential Core. However, Goldman Sachs Government is 1.03 times less risky than Prudential Core. It trades about 0.16 of its potential returns per unit of risk. Prudential Core Conservative is currently generating about 0.12 per unit of risk. If you would invest  1,265  in Goldman Sachs Government on December 24, 2024 and sell it today you would earn a total of  37.00  from holding Goldman Sachs Government or generate 2.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Goldman Sachs Government  vs.  Prudential Core Conservative

Goldman Sachs Government

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Government are ranked lower than 12 (%) 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.

Prudential Core Cons

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Core Conservative are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Prudential Core 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 Prudential Core

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

The idea behind Goldman Sachs Government and Prudential Core Conservative 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..