Correlation Between Goldman Sachs and Computershare

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

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

Diversification Opportunities for Goldman Sachs and Computershare

0.84

Correlation Coefficient

Goldman Sachs  Computershare

Very poor diversification

The 3 months correlation between Goldman and Computershare is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Group and Computershare Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computershare ADR 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 Group are associated (or correlated) with Computershare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computershare ADR has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Computershare go up and down completely randomly.

Pair Corralation between Goldman Sachs and Computershare

Allowing for the 90-day total investment horizon Goldman Sachs Group is expected to under-perform the Computershare. But the stock apears to be less risky and, when comparing its historical volatility, Goldman Sachs Group is 1.07 times less risky than Computershare. The stock trades about -0.02 of its potential returns per unit of risk. The Computershare Ltd ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,138  in Computershare Ltd ADR on October 11, 2024 and sell it today you would earn a total of  20.00  from holding Computershare Ltd ADR or generate 0.94% return on investment over 90 days.

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

Goldman Sachs Group  vs.  Computershare Ltd ADR

Goldman Sachs Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Computershare ADR

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Computershare Ltd ADR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Computershare showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goldman Sachs and Computershare

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

The idea behind Goldman Sachs Group and Computershare Ltd ADR 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..