Correlation Between Goldman Sachs and Gotham Enhanced

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

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

Diversification Opportunities for Goldman Sachs and Gotham Enhanced

0.99

Correlation Coefficient

Goldman Sachs  Gotham Enhanced

No risk reduction

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

Pair Corralation between Goldman Sachs and Gotham Enhanced

Given the investment horizon of 90 days Goldman Sachs MarketBeta is expected to generate 1.0 times more return on investment than Gotham Enhanced. However, Goldman Sachs MarketBeta is 1.0 times less risky than Gotham Enhanced. It trades about 0.08 of its potential returns per unit of risk. Gotham Enhanced 500 is currently generating about 0.08 per unit of risk. If you would invest  5,220  in Goldman Sachs MarketBeta on October 26, 2024 and sell it today you would earn a total of  60.00  from holding Goldman Sachs MarketBeta or generate 1.15% return on investment over 90 days.

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

Goldman Sachs MarketBeta  vs.  Gotham Enhanced 500

Goldman Sachs MarketBeta

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs MarketBeta are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Goldman Sachs is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Gotham Enhanced 500

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gotham Enhanced 500 are ranked lower than 7 (%) 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.

Pair Trading with Goldman Sachs and Gotham Enhanced

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

The idea behind Goldman Sachs MarketBeta and Gotham Enhanced 500 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 Stocks Directory module to find actively traded stocks across global markets.