Correlation Between Invesco NASDAQ and Goldman Sachs

Can any of the company-specific risk be diversified away by investing in both Invesco NASDAQ 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 NASDAQ 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 NASDAQ Next and Goldman Sachs Future, you can compare the effects of market volatilities on Invesco NASDAQ 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 NASDAQ with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco NASDAQ and Goldman Sachs.

Diversification Opportunities for Invesco NASDAQ and Goldman Sachs

0.96

Correlation Coefficient

Invesco NASDAQ  Goldman Sachs

Almost no diversification

The 3 months correlation between Invesco and Goldman is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Invesco NASDAQ Next 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 NASDAQ 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 NASDAQ Next 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 NASDAQ i.e., Invesco NASDAQ and Goldman Sachs go up and down completely randomly.

Pair Corralation between Invesco NASDAQ and Goldman Sachs

Given the investment horizon of 90 days Invesco NASDAQ Next is expected to generate 0.71 times more return on investment than Goldman Sachs. However, Invesco NASDAQ Next is 1.41 times less risky than Goldman Sachs. It trades about -0.04 of its potential returns per unit of risk. Goldman Sachs Future is currently generating about -0.07 per unit of risk. If you would invest  3,086  in Invesco NASDAQ Next on December 28, 2024 and sell it today you would lose (108.00) from holding Invesco NASDAQ Next or give up 3.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Invesco NASDAQ Next  vs.  Goldman Sachs Future

Invesco NASDAQ Next

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco NASDAQ Next has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Invesco NASDAQ is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

Goldman Sachs Future

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goldman Sachs Future has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest sluggish performance, the Etf's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

Pair Trading with Invesco NASDAQ and Goldman Sachs

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