Correlation Between Goldman Sachs and Direxion

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

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

Diversification Opportunities for Goldman Sachs and Direxion

0.0

Correlation Coefficient

Goldman Sachs  Direxion

Pay attention - limited upside

The 3 months correlation between Goldman and Direxion is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs ActiveBeta and Direxion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion 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 ActiveBeta are associated (or correlated) with Direxion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Direxion go up and down completely randomly.

Pair Corralation between Goldman Sachs and Direxion

If you would invest  7,934  in Goldman Sachs ActiveBeta on October 23, 2024 and sell it today you would earn a total of  3,940  from holding Goldman Sachs ActiveBeta or generate 49.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Goldman Sachs ActiveBeta  vs.  Direxion

Goldman Sachs ActiveBeta

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs ActiveBeta are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Goldman Sachs is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Direxion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Direxion is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Goldman Sachs and Direxion

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

The idea behind Goldman Sachs ActiveBeta and Direxion 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.