Correlation Between Goldman Sachs and VeriSign

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

Diversification Opportunities for Goldman Sachs and VeriSign

0.34

Correlation Coefficient

Goldman Sachs  VeriSign

Weak diversification

The 3 months correlation between Goldman and VeriSign is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Group and VeriSign in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VeriSign 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 VeriSign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VeriSign has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and VeriSign go up and down completely randomly.

Pair Corralation between Goldman Sachs and VeriSign

Allowing for the 90-day total investment horizon Goldman Sachs Group is expected to generate 1.3 times more return on investment than VeriSign. However, Goldman Sachs is 1.3 times more volatile than VeriSign. It trades about 0.08 of its potential returns per unit of risk. VeriSign is currently generating about 0.01 per unit of risk. If you would invest  32,698  in Goldman Sachs Group on October 9, 2024 and sell it today you would earn a total of  25,067  from holding Goldman Sachs Group or generate 76.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Goldman Sachs Group  vs.  VeriSign

Goldman Sachs Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Group are ranked lower than 9 (%) 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.

VeriSign

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Goldman Sachs and VeriSign

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

The idea behind Goldman Sachs Group and VeriSign 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..