Correlation Between Goldman Sachs and Peruvian Metals

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

Diversification Opportunities for Goldman Sachs and Peruvian Metals

-0.37

Correlation Coefficient

Goldman Sachs  Peruvian Metals

Very good diversification

The 3 months correlation between Goldman and Peruvian is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Group and Peruvian Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peruvian Metals Corp 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 Peruvian Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peruvian Metals Corp has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Peruvian Metals go up and down completely randomly.

Pair Corralation between Goldman Sachs and Peruvian Metals

Allowing for the 90-day total investment horizon Goldman Sachs Group is expected to generate 1.72 times more return on investment than Peruvian Metals. However, Goldman Sachs is 1.72 times more volatile than Peruvian Metals Corp. It trades about 0.29 of its potential returns per unit of risk. Peruvian Metals Corp is currently generating about -0.09 per unit of risk. If you would invest  57,078  in Goldman Sachs Group on October 24, 2024 and sell it today you would earn a total of  5,516  from holding Goldman Sachs Group or generate 9.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

Goldman Sachs Group  vs.  Peruvian Metals Corp

Goldman Sachs Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Group are ranked lower than 11 (%) 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.

Peruvian Metals Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Peruvian Metals Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Peruvian Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goldman Sachs and Peruvian Metals

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

The idea behind Goldman Sachs Group and Peruvian Metals Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.