Correlation Between Goldman Sachs and BMO Short

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

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

Diversification Opportunities for Goldman Sachs and BMO Short

0.74

Correlation Coefficient

Goldman Sachs  BMO Short

Poor diversification

The 3 months correlation between Goldman and BMO is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs ActiveBeta and BMO Short Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Short Corporate 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 ActiveBeta are associated (or correlated) with BMO Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Short Corporate has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and BMO Short go up and down completely randomly.

Pair Corralation between Goldman Sachs and BMO Short

Given the investment horizon of 90 days Goldman Sachs ActiveBeta is expected to generate 3.17 times more return on investment than BMO Short. However, Goldman Sachs is 3.17 times more volatile than BMO Short Corporate. It trades about 0.11 of its potential returns per unit of risk. BMO Short Corporate is currently generating about 0.3 per unit of risk. If you would invest  5,091  in Goldman Sachs ActiveBeta on September 13, 2024 and sell it today you would earn a total of  54.00  from holding Goldman Sachs ActiveBeta or generate 1.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Goldman Sachs ActiveBeta  vs.  BMO Short Corporate

Goldman Sachs ActiveBeta

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs ActiveBeta are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Goldman Sachs is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

BMO Short Corporate

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Short Corporate are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO Short is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Goldman Sachs and BMO Short

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

The idea behind Goldman Sachs ActiveBeta and BMO Short Corporate 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.