Correlation Between Gotham Enhanced and Goldman Sachs

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

By analyzing existing cross correlation between Gotham Enhanced 500 and Goldman Sachs MarketBeta, you can compare the effects of market volatilities on Gotham Enhanced and Goldman Sachs 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 Gotham Enhanced with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gotham Enhanced and Goldman Sachs.

Diversification Opportunities for Gotham Enhanced and Goldman Sachs

0.99

Correlation Coefficient

Gotham Enhanced  Goldman Sachs

No risk reduction

The 3 months correlation between Gotham and Goldman is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Gotham Enhanced 500 and Goldman Sachs MarketBeta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs MarketBeta and Gotham Enhanced 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 Gotham Enhanced 500 are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs MarketBeta has no effect on the direction of Gotham Enhanced i.e., Gotham Enhanced and Goldman Sachs go up and down completely randomly.

Pair Corralation between Gotham Enhanced and Goldman Sachs

Given the investment horizon of 90 days Gotham Enhanced 500 is expected to generate 0.94 times more return on investment than Goldman Sachs. However, Gotham Enhanced 500 is 1.06 times less risky than Goldman Sachs. It trades about -0.09 of its potential returns per unit of risk. Goldman Sachs MarketBeta is currently generating about -0.09 per unit of risk. If you would invest  3,279  in Gotham Enhanced 500 on October 11, 2024 and sell it today you would lose (59.00) from holding Gotham Enhanced 500 or give up 1.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Gotham Enhanced 500  vs.  Goldman Sachs MarketBeta

Gotham Enhanced 500

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gotham Enhanced 500 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Gotham Enhanced is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs MarketBeta

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs MarketBeta are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Goldman Sachs is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Gotham Enhanced and Goldman Sachs

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

The idea behind Gotham Enhanced 500 and Goldman Sachs MarketBeta 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.