Correlation Between Goldman Sachs and Emerald Insights

Can any of the company-specific risk be diversified away by investing in both Goldman Sachs and Emerald Insights 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 Emerald Insights 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 Emerald Insights Fund, you can compare the effects of market volatilities on Goldman Sachs and Emerald Insights 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 Emerald Insights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and Emerald Insights.

Diversification Opportunities for Goldman Sachs and Emerald Insights

0.85

Correlation Coefficient

Goldman Sachs  Emerald Insights

Very poor diversification

The 3 months correlation between Goldman and Emerald is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Technology and Emerald Insights Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerald Insights 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 Emerald Insights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerald Insights has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Emerald Insights go up and down completely randomly.

Pair Corralation between Goldman Sachs and Emerald Insights

Assuming the 90 days horizon Goldman Sachs Technology is expected to generate 1.09 times more return on investment than Emerald Insights. However, Goldman Sachs is 1.09 times more volatile than Emerald Insights Fund. It trades about 0.04 of its potential returns per unit of risk. Emerald Insights Fund is currently generating about 0.04 per unit of risk. If you would invest  3,026  in Goldman Sachs Technology on December 5, 2024 and sell it today you would earn a total of  372.00  from holding Goldman Sachs Technology or generate 12.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.6%
Values	Daily Returns

Goldman Sachs Technology  vs.  Emerald Insights Fund

Goldman Sachs Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goldman Sachs Technology 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.

Emerald Insights

Risk-Adjusted Performance

Very Weak

Over the last 90 days Emerald Insights Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental 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 Goldman Sachs and Emerald Insights

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

The idea behind Goldman Sachs Technology and Emerald Insights 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.