Correlation Between International Business and Goldman Sachs

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

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

Diversification Opportunities for International Business and Goldman Sachs

0.46

Correlation Coefficient

International Business  Goldman Sachs

Very weak diversification

The 3 months correlation between International and Goldman is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Goldman Sachs Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Dynamic and International Business 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 International Business Machines 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 Dynamic has no effect on the direction of International Business i.e., International Business and Goldman Sachs go up and down completely randomly.

Pair Corralation between International Business and Goldman Sachs

Considering the 90-day investment horizon International Business Machines is expected to under-perform the Goldman Sachs. In addition to that, International Business is 4.37 times more volatile than Goldman Sachs Dynamic. It trades about -0.14 of its total potential returns per unit of risk. Goldman Sachs Dynamic is currently generating about -0.27 per unit of volatility. If you would invest  1,555  in Goldman Sachs Dynamic on October 8, 2024 and sell it today you would lose (22.00) from holding Goldman Sachs Dynamic or give up 1.41% of portfolio value over 90 days.

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

International Business Machine  vs.  Goldman Sachs Dynamic

International Business

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, International Business is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Goldman Sachs Dynamic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Dynamic 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 International Business and Goldman Sachs

The main advantage of trading using opposite International Business and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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 International Business Machines and Goldman Sachs Dynamic 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.