Correlation Between Goldman Sachs and Invesco Energy

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

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

Diversification Opportunities for Goldman Sachs and Invesco Energy

0.84

Correlation Coefficient

Goldman Sachs  Invesco Energy

Very poor diversification

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

Pair Corralation between Goldman Sachs and Invesco Energy

Assuming the 90 days horizon Goldman Sachs Equity is expected to generate 0.79 times more return on investment than Invesco Energy. However, Goldman Sachs Equity is 1.27 times less risky than Invesco Energy. It trades about -0.11 of its potential returns per unit of risk. Invesco Energy Fund is currently generating about -0.14 per unit of risk. If you would invest  1,810  in Goldman Sachs Equity on October 9, 2024 and sell it today you would lose (89.00) from holding Goldman Sachs Equity or give up 4.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.5%
Values	Daily Returns

Goldman Sachs Equity  vs.  Invesco Energy Fund

Goldman Sachs Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Energy Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Goldman Sachs and Invesco Energy

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

The idea behind Goldman Sachs Equity and Invesco Energy Fund 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.