Correlation Between Invesco DWA and Goldman Sachs

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

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

Diversification Opportunities for Invesco DWA and Goldman Sachs

0.63

Correlation Coefficient

Invesco DWA  Goldman Sachs

Poor diversification

The 3 months correlation between Invesco and Goldman is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DWA Utilities and Goldman Sachs Future in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Future and Invesco DWA 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 Invesco DWA Utilities 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 Future has no effect on the direction of Invesco DWA i.e., Invesco DWA and Goldman Sachs go up and down completely randomly.

Pair Corralation between Invesco DWA and Goldman Sachs

Considering the 90-day investment horizon Invesco DWA Utilities is expected to under-perform the Goldman Sachs. But the etf apears to be less risky and, when comparing its historical volatility, Invesco DWA Utilities is 1.53 times less risky than Goldman Sachs. The etf trades about -0.17 of its potential returns per unit of risk. The Goldman Sachs Future is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  3,188  in Goldman Sachs Future on September 17, 2024 and sell it today you would earn a total of  215.00  from holding Goldman Sachs Future or generate 6.74% return on investment over 90 days.

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

Invesco DWA Utilities  vs.  Goldman Sachs Future

Invesco DWA Utilities

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Utilities are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Invesco DWA is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Goldman Sachs Future

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Future are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent technical and fundamental indicators, Goldman Sachs disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco DWA and Goldman Sachs

The main advantage of trading using opposite Invesco DWA and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco DWA 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 Invesco DWA Utilities and Goldman Sachs Future 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.