Correlation Between Goldman Sachs and The Arbitrage

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

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

Diversification Opportunities for Goldman Sachs and The Arbitrage

-0.2

Correlation Coefficient

Goldman Sachs  The Arbitrage

Good diversification

The 3 months correlation between Goldman and The is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Technology and The Arbitrage Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Arbitrage 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 Technology are associated (or correlated) with The Arbitrage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Arbitrage has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and The Arbitrage go up and down completely randomly.

Pair Corralation between Goldman Sachs and The Arbitrage

Assuming the 90 days horizon Goldman Sachs Technology is expected to under-perform the The Arbitrage. In addition to that, Goldman Sachs is 8.34 times more volatile than The Arbitrage Fund. It trades about -0.09 of its total potential returns per unit of risk. The Arbitrage Fund is currently generating about 0.08 per unit of volatility. If you would invest  1,184  in The Arbitrage Fund on October 11, 2024 and sell it today you would earn a total of  4.00  from holding The Arbitrage Fund or generate 0.34% return on investment over 90 days.

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

Goldman Sachs Technology  vs.  The Arbitrage Fund

Goldman Sachs Technology

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Technology are ranked lower than 4 (%) 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.

The Arbitrage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Arbitrage Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, The Arbitrage 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 The Arbitrage

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

The idea behind Goldman Sachs Technology and The Arbitrage Fund 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.