Correlation Between The Emerging and Goldman Sachs

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

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

Diversification Opportunities for The Emerging and Goldman Sachs

0.34

Correlation Coefficient

The Emerging  Goldman Sachs

Weak diversification

The 3 months correlation between The and Goldman is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding The Emerging Markets and Goldman Sachs International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Intern and The Emerging 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 The Emerging Markets 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 Intern has no effect on the direction of The Emerging i.e., The Emerging and Goldman Sachs go up and down completely randomly.

Pair Corralation between The Emerging and Goldman Sachs

Assuming the 90 days horizon The Emerging Markets is expected to generate 1.2 times more return on investment than Goldman Sachs. However, The Emerging is 1.2 times more volatile than Goldman Sachs International. It trades about 0.03 of its potential returns per unit of risk. Goldman Sachs International is currently generating about -0.05 per unit of risk. If you would invest  1,837  in The Emerging Markets on September 4, 2024 and sell it today you would earn a total of  25.00  from holding The Emerging Markets or generate 1.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

The Emerging Markets  vs.  Goldman Sachs International

Emerging Markets

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Emerging Markets are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, The Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs Intern

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with The Emerging and Goldman Sachs

The main advantage of trading using opposite The Emerging and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Emerging 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 The Emerging Markets and Goldman Sachs International 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.