Correlation Between Freedom Day and Goldman Sachs

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

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

Diversification Opportunities for Freedom Day and Goldman Sachs

0.45

Correlation Coefficient

Freedom Day  Goldman Sachs

Very weak diversification

The 3 months correlation between Freedom and Goldman is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Day Dividend 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 Freedom Day 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 Freedom Day Dividend 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 Freedom Day i.e., Freedom Day and Goldman Sachs go up and down completely randomly.

Pair Corralation between Freedom Day and Goldman Sachs

Given the investment horizon of 90 days Freedom Day is expected to generate 3.0 times less return on investment than Goldman Sachs. In addition to that, Freedom Day is 1.19 times more volatile than Goldman Sachs SP. It trades about 0.03 of its total potential returns per unit of risk. Goldman Sachs SP is currently generating about 0.1 per unit of volatility. If you would invest  4,542  in Goldman Sachs SP on September 22, 2024 and sell it today you would earn a total of  430.00  from holding Goldman Sachs SP or generate 9.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.22%
Values	Daily Returns

Freedom Day Dividend  vs.  Goldman Sachs SP

Freedom Day Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freedom Day Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Freedom Day is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Freedom Day and Goldman Sachs

The main advantage of trading using opposite Freedom Day and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freedom Day 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 Freedom Day Dividend 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.