Correlation Between Realty Income and Goldman Sachs

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

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

Diversification Opportunities for Realty Income and Goldman Sachs

0.02

Correlation Coefficient

Realty Income  Goldman Sachs

Significant diversification

The 3 months correlation between Realty and Goldman is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income and Goldman Sachs Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Real and Realty Income 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 Realty Income 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 Real has no effect on the direction of Realty Income i.e., Realty Income and Goldman Sachs go up and down completely randomly.

Pair Corralation between Realty Income and Goldman Sachs

Taking into account the 90-day investment horizon Realty Income is expected to under-perform the Goldman Sachs. In addition to that, Realty Income is 1.21 times more volatile than Goldman Sachs Real. It trades about -0.14 of its total potential returns per unit of risk. Goldman Sachs Real is currently generating about -0.02 per unit of volatility. If you would invest  1,340  in Goldman Sachs Real on September 12, 2024 and sell it today you would lose (17.00) from holding Goldman Sachs Real or give up 1.27% of portfolio value over 90 days.

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

Realty Income  vs.  Goldman Sachs Real

Realty Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Realty Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Goldman Sachs Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Real has generated negative risk-adjusted returns adding no value to fund investors. 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 Realty Income and Goldman Sachs

The main advantage of trading using opposite Realty Income and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Realty Income 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 Realty Income and Goldman Sachs Real 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.