Correlation Between Real Estate and Goldman Sachs

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

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

Diversification Opportunities for Real Estate and Goldman Sachs

0.4

Correlation Coefficient

Real Estate  Goldman Sachs

Very weak diversification

The 3 months correlation between Real and Goldman is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Real Estate Ultrasector and Goldman Sachs Smallmid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Smallmid and Real Estate 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 Real Estate Ultrasector 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 Smallmid has no effect on the direction of Real Estate i.e., Real Estate and Goldman Sachs go up and down completely randomly.

Pair Corralation between Real Estate and Goldman Sachs

Assuming the 90 days horizon Real Estate Ultrasector is expected to under-perform the Goldman Sachs. In addition to that, Real Estate is 1.53 times more volatile than Goldman Sachs Smallmid. It trades about -0.1 of its total potential returns per unit of risk. Goldman Sachs Smallmid is currently generating about -0.11 per unit of volatility. If you would invest  2,603  in Goldman Sachs Smallmid on October 7, 2024 and sell it today you would lose (137.00) from holding Goldman Sachs Smallmid or give up 5.26% of portfolio value over 90 days.

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

Real Estate Ultrasector  vs.  Goldman Sachs Smallmid

Real Estate Ultrasector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Estate Ultrasector has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Goldman Sachs Smallmid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Smallmid 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 Real Estate and Goldman Sachs

The main advantage of trading using opposite Real Estate and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Estate 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 Real Estate Ultrasector and Goldman Sachs Smallmid 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.