Correlation Between Goldman Sachs and Destinations Municipal

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

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

Diversification Opportunities for Goldman Sachs and Destinations Municipal

0.61

Correlation Coefficient

Goldman Sachs  Destinations Municipal

Poor diversification

The 3 months correlation between Goldman and Destinations is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Real and Destinations Municipal Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destinations Municipal 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 Real are associated (or correlated) with Destinations Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destinations Municipal has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Destinations Municipal go up and down completely randomly.

Pair Corralation between Goldman Sachs and Destinations Municipal

Assuming the 90 days horizon Goldman Sachs Real is expected to under-perform the Destinations Municipal. In addition to that, Goldman Sachs is 5.54 times more volatile than Destinations Municipal Fixed. It trades about -0.1 of its total potential returns per unit of risk. Destinations Municipal Fixed is currently generating about -0.1 per unit of volatility. If you would invest  973.00  in Destinations Municipal Fixed on October 7, 2024 and sell it today you would lose (13.00) from holding Destinations Municipal Fixed or give up 1.34% of portfolio value over 90 days.

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

Goldman Sachs Real  vs.  Destinations Municipal Fixed

Goldman Sachs Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Real 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.

Destinations Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Destinations Municipal Fixed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Destinations Municipal 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 Destinations Municipal

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

The idea behind Goldman Sachs Real and Destinations Municipal Fixed 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.