Correlation Between Gmo Resources and Goldman Sachs

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

By analyzing existing cross correlation between Gmo Resources and Goldman Sachs Strategic, you can compare the effects of market volatilities on Gmo Resources and Goldman Sachs 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 Gmo Resources with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Resources and Goldman Sachs.

Diversification Opportunities for Gmo Resources and Goldman Sachs

-0.46

Correlation Coefficient

Gmo Resources  Goldman Sachs

Very good diversification

The 3 months correlation between Gmo and Goldman is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Resources and Goldman Sachs Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Strategic and Gmo Resources 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 Gmo Resources are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Strategic has no effect on the direction of Gmo Resources i.e., Gmo Resources and Goldman Sachs go up and down completely randomly.

Pair Corralation between Gmo Resources and Goldman Sachs

Assuming the 90 days horizon Gmo Resources is expected to under-perform the Goldman Sachs. In addition to that, Gmo Resources is 1.24 times more volatile than Goldman Sachs Strategic. It trades about -0.03 of its total potential returns per unit of risk. Goldman Sachs Strategic is currently generating about 0.11 per unit of volatility. If you would invest  784.00  in Goldman Sachs Strategic on September 26, 2024 and sell it today you would earn a total of  618.00  from holding Goldman Sachs Strategic or generate 78.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Gmo Resources  vs.  Goldman Sachs Strategic

Gmo Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo Resources has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Goldman Sachs Strategic

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Strategic are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Goldman Sachs may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gmo Resources and Goldman Sachs

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

The idea behind Gmo Resources and Goldman Sachs Strategic 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.