Correlation Between JPMorgan Equity and Goldman Sachs

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

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

Diversification Opportunities for JPMorgan Equity and Goldman Sachs

0.85

Correlation Coefficient

JPMorgan Equity  Goldman Sachs

Very poor diversification

The 3 months correlation between JPMorgan and Goldman is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Equity Premium and Goldman Sachs SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs SP and JPMorgan Equity 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 JPMorgan Equity Premium 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 SP has no effect on the direction of JPMorgan Equity i.e., JPMorgan Equity and Goldman Sachs go up and down completely randomly.

Pair Corralation between JPMorgan Equity and Goldman Sachs

Given the investment horizon of 90 days JPMorgan Equity Premium is expected to under-perform the Goldman Sachs. But the etf apears to be less risky and, when comparing its historical volatility, JPMorgan Equity Premium is 1.1 times less risky than Goldman Sachs. The etf trades about -0.17 of its potential returns per unit of risk. The Goldman Sachs SP is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,969  in Goldman Sachs SP on September 22, 2024 and sell it today you would earn a total of  3.00  from holding Goldman Sachs SP or generate 0.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

JPMorgan Equity Premium  vs.  Goldman Sachs SP

JPMorgan Equity Premium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPMorgan Equity Premium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, JPMorgan Equity is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Goldman Sachs SP

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with JPMorgan Equity and Goldman Sachs

The main advantage of trading using opposite JPMorgan Equity and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan Equity 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 JPMorgan Equity Premium and Goldman Sachs SP 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.