Correlation Between Goldman Sachs and PPLUS Trust

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

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

Diversification Opportunities for Goldman Sachs and PPLUS Trust

0.1

Correlation Coefficient

Goldman Sachs  PPLUS Trust

Average diversification

The 3 months correlation between Goldman and PPLUS is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Capital and PPLUS Trust Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPLUS Trust Series 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 Capital are associated (or correlated) with PPLUS Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPLUS Trust Series has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and PPLUS Trust go up and down completely randomly.

Pair Corralation between Goldman Sachs and PPLUS Trust

Considering the 90-day investment horizon Goldman Sachs Capital is expected to generate 3.32 times more return on investment than PPLUS Trust. However, Goldman Sachs is 3.32 times more volatile than PPLUS Trust Series. It trades about 0.06 of its potential returns per unit of risk. PPLUS Trust Series is currently generating about 0.0 per unit of risk. If you would invest  2,626  in Goldman Sachs Capital on September 22, 2024 and sell it today you would earn a total of  64.00  from holding Goldman Sachs Capital or generate 2.44% return on investment over 90 days.

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

Goldman Sachs Capital  vs.  PPLUS Trust Series

Goldman Sachs Capital

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Capital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Goldman Sachs is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

PPLUS Trust Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PPLUS Trust Series has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, PPLUS Trust 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 Goldman Sachs and PPLUS Trust

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

The idea behind Goldman Sachs Capital and PPLUS Trust Series 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..