Correlation Between Laurentian Bank and GOLDMAN SACHS

Can any of the company-specific risk be diversified away by investing in both Laurentian Bank 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 Laurentian Bank and GOLDMAN SACHS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Laurentian Bank and GOLDMAN SACHS CDR, you can compare the effects of market volatilities on Laurentian Bank 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 Laurentian Bank with a short position of GOLDMAN SACHS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Laurentian Bank and GOLDMAN SACHS.

Diversification Opportunities for Laurentian Bank and GOLDMAN SACHS

0.36

Correlation Coefficient

Laurentian Bank  GOLDMAN SACHS

Weak diversification

The 3 months correlation between Laurentian and GOLDMAN is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Laurentian Bank and GOLDMAN SACHS CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOLDMAN SACHS CDR and Laurentian Bank 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 Laurentian Bank 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 CDR has no effect on the direction of Laurentian Bank i.e., Laurentian Bank and GOLDMAN SACHS go up and down completely randomly.

Pair Corralation between Laurentian Bank and GOLDMAN SACHS

Assuming the 90 days horizon Laurentian Bank is expected to generate 0.48 times more return on investment than GOLDMAN SACHS. However, Laurentian Bank is 2.08 times less risky than GOLDMAN SACHS. It trades about -0.05 of its potential returns per unit of risk. GOLDMAN SACHS CDR is currently generating about -0.03 per unit of risk. If you would invest  2,808  in Laurentian Bank on December 30, 2024 and sell it today you would lose (100.00) from holding Laurentian Bank or give up 3.56% of portfolio value over 90 days.

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

Laurentian Bank  vs.  GOLDMAN SACHS CDR

Laurentian Bank

Risk-Adjusted Performance

Very Weak

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

GOLDMAN SACHS CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days GOLDMAN SACHS CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, GOLDMAN SACHS is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Laurentian Bank and GOLDMAN SACHS

The main advantage of trading using opposite Laurentian Bank and GOLDMAN SACHS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laurentian Bank 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's long position.

The idea behind Laurentian Bank and GOLDMAN SACHS CDR 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.