Correlation Between Goldman Sachs and Ribbon Communications

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

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

Diversification Opportunities for Goldman Sachs and Ribbon Communications

0.91

Correlation Coefficient

Goldman Sachs  Ribbon Communications

Almost no diversification

The 3 months correlation between Goldman and Ribbon is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding The Goldman Sachs and Ribbon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ribbon Communications 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 The Goldman Sachs are associated (or correlated) with Ribbon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ribbon Communications has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Ribbon Communications go up and down completely randomly.

Pair Corralation between Goldman Sachs and Ribbon Communications

Assuming the 90 days horizon The Goldman Sachs is expected to generate 0.52 times more return on investment than Ribbon Communications. However, The Goldman Sachs is 1.92 times less risky than Ribbon Communications. It trades about 0.12 of its potential returns per unit of risk. Ribbon Communications is currently generating about 0.06 per unit of risk. If you would invest  33,761  in The Goldman Sachs on October 9, 2024 and sell it today you would earn a total of  22,379  from holding The Goldman Sachs or generate 66.29% return on investment over 90 days.

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

The Goldman Sachs  vs.  Ribbon Communications

Goldman Sachs

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Goldman Sachs are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Goldman Sachs reported solid returns over the last few months and may actually be approaching a breakup point.

Ribbon Communications

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ribbon Communications are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ribbon Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goldman Sachs and Ribbon Communications

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

The idea behind The Goldman Sachs and Ribbon Communications 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.