Correlation Between Global Net and Goldman Sachs

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

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

Diversification Opportunities for Global Net and Goldman Sachs

-0.11

Correlation Coefficient

Global Net  Goldman Sachs

Good diversification

The 3 months correlation between Global and Goldman is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Global Net Lease and Goldman Sachs Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Capital and Global Net 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 Global Net Lease 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 Capital has no effect on the direction of Global Net i.e., Global Net and Goldman Sachs go up and down completely randomly.

Pair Corralation between Global Net and Goldman Sachs

Assuming the 90 days trading horizon Global Net Lease is expected to generate 0.57 times more return on investment than Goldman Sachs. However, Global Net Lease is 1.77 times less risky than Goldman Sachs. It trades about 0.05 of its potential returns per unit of risk. Goldman Sachs Capital is currently generating about 0.02 per unit of risk. If you would invest  2,223  in Global Net Lease on December 20, 2024 and sell it today you would earn a total of  73.00  from holding Global Net Lease or generate 3.28% return on investment over 90 days.

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

Global Net Lease  vs.  Goldman Sachs Capital

Global Net Lease

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Net Lease are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Global Net is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Goldman Sachs Capital

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Capital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Goldman Sachs is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Global Net and Goldman Sachs

The main advantage of trading using opposite Global Net and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Net 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 Global Net Lease and Goldman Sachs Capital 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.