Correlation Between Power REIT and Goldman Sachs

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

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

Diversification Opportunities for Power REIT and Goldman Sachs

0.05

Correlation Coefficient

Power REIT  Goldman Sachs

Significant diversification

The 3 months correlation between Power and Goldman is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Power REIT and Goldman Sachs Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Group and Power REIT 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 Power REIT 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 Group has no effect on the direction of Power REIT i.e., Power REIT and Goldman Sachs go up and down completely randomly.

Pair Corralation between Power REIT and Goldman Sachs

Allowing for the 90-day total investment horizon Power REIT is expected to under-perform the Goldman Sachs. In addition to that, Power REIT is 2.54 times more volatile than Goldman Sachs Group. It trades about -0.02 of its total potential returns per unit of risk. Goldman Sachs Group is currently generating about 0.01 per unit of volatility. If you would invest  57,334  in Goldman Sachs Group on December 27, 2024 and sell it today you would earn a total of  58.00  from holding Goldman Sachs Group or generate 0.1% return on investment over 90 days.

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

Power REIT  vs.  Goldman Sachs Group

Power REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Power REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Power REIT is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Goldman Sachs Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goldman Sachs Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Goldman Sachs is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Power REIT and Goldman Sachs

The main advantage of trading using opposite Power REIT and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power REIT 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 Power REIT and Goldman Sachs Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..