Correlation Between Goldman Sachs and ALPS

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

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

Diversification Opportunities for Goldman Sachs and ALPS

-0.58

Correlation Coefficient

Goldman Sachs  ALPS

Excellent diversification

The 3 months correlation between Goldman and ALPS is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Future and ALPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS 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 Future are associated (or correlated) with ALPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and ALPS go up and down completely randomly.

Pair Corralation between Goldman Sachs and ALPS

Given the investment horizon of 90 days Goldman Sachs is expected to generate 4.69 times less return on investment than ALPS. But when comparing it to its historical volatility, Goldman Sachs Future is 1.02 times less risky than ALPS. It trades about 0.03 of its potential returns per unit of risk. ALPS is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,081  in ALPS on October 21, 2024 and sell it today you would earn a total of  363.00  from holding ALPS or generate 17.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	27.75%
Values	Daily Returns

Goldman Sachs Future  vs.  ALPS

Goldman Sachs Future

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Future has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Goldman Sachs is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

ALPS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALPS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, ALPS is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Goldman Sachs and ALPS

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

The idea behind Goldman Sachs Future and ALPS 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .