Correlation Between Goldman Sachs and FLOW TRADERS

Can any of the company-specific risk be diversified away by investing in both Goldman Sachs and FLOW TRADERS 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 FLOW TRADERS 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 FLOW TRADERS LTD, you can compare the effects of market volatilities on Goldman Sachs and FLOW TRADERS 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 FLOW TRADERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and FLOW TRADERS.

Diversification Opportunities for Goldman Sachs and FLOW TRADERS

0.71

Correlation Coefficient

Goldman Sachs  FLOW TRADERS

Poor diversification

The 3 months correlation between Goldman and FLOW is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding The Goldman Sachs and FLOW TRADERS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLOW TRADERS LTD 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 FLOW TRADERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FLOW TRADERS LTD has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and FLOW TRADERS go up and down completely randomly.

Pair Corralation between Goldman Sachs and FLOW TRADERS

Assuming the 90 days trading horizon Goldman Sachs is expected to generate 5.65 times less return on investment than FLOW TRADERS. But when comparing it to its historical volatility, The Goldman Sachs is 1.38 times less risky than FLOW TRADERS. It trades about 0.04 of its potential returns per unit of risk. FLOW TRADERS LTD is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,116  in FLOW TRADERS LTD on December 1, 2024 and sell it today you would earn a total of  446.00  from holding FLOW TRADERS LTD or generate 21.08% return on investment over 90 days.

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

The Goldman Sachs  vs.  FLOW TRADERS LTD

Goldman Sachs

Risk-Adjusted Performance

Weak

Over the last 90 days The Goldman Sachs has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

FLOW TRADERS LTD

Risk-Adjusted Performance

Good

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

Pair Trading with Goldman Sachs and FLOW TRADERS

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

The idea behind The Goldman Sachs and FLOW TRADERS LTD 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.

Check out your portfolio center.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.