Correlation Between Multi-manager High and Goldman Sachs

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

By analyzing existing cross correlation between Multi Manager High Yield and Goldman Sachs Enhanced, you can compare the effects of market volatilities on Multi-manager High 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 Multi-manager High with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multi-manager High and Goldman Sachs.

Diversification Opportunities for Multi-manager High and Goldman Sachs

0.31

Correlation Coefficient

Multi-manager High  Goldman Sachs

Weak diversification

The 3 months correlation between Multi-manager and Goldman is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Multi Manager High Yield and Goldman Sachs Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Enhanced and Multi-manager High 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 Multi Manager High Yield 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 Enhanced has no effect on the direction of Multi-manager High i.e., Multi-manager High and Goldman Sachs go up and down completely randomly.

Pair Corralation between Multi-manager High and Goldman Sachs

Assuming the 90 days horizon Multi Manager High Yield is expected to generate 2.32 times more return on investment than Goldman Sachs. However, Multi-manager High is 2.32 times more volatile than Goldman Sachs Enhanced. It trades about 0.14 of its potential returns per unit of risk. Goldman Sachs Enhanced is currently generating about 0.21 per unit of risk. If you would invest  715.00  in Multi Manager High Yield on October 11, 2024 and sell it today you would earn a total of  126.00  from holding Multi Manager High Yield or generate 17.62% return on investment over 90 days.

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

Multi Manager High Yield  vs.  Goldman Sachs Enhanced

Multi Manager High

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Manager High Yield are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Multi-manager High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs Enhanced

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Enhanced are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. 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 Multi-manager High and Goldman Sachs

The main advantage of trading using opposite Multi-manager High and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multi-manager High 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 Multi Manager High Yield and Goldman Sachs Enhanced 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.