Correlation Between Short Precious and Goldman Sachs

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

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

Diversification Opportunities for Short Precious and Goldman Sachs

0.19

Correlation Coefficient

Short Precious  Goldman Sachs

Average diversification

The 3 months correlation between Short and Goldman is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Short Precious Metals and Goldman Sachs Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Clean and Short Precious 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 Short Precious Metals 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 Clean has no effect on the direction of Short Precious i.e., Short Precious and Goldman Sachs go up and down completely randomly.

Pair Corralation between Short Precious and Goldman Sachs

Assuming the 90 days horizon Short Precious Metals is expected to under-perform the Goldman Sachs. In addition to that, Short Precious is 1.92 times more volatile than Goldman Sachs Clean. It trades about -0.08 of its total potential returns per unit of risk. Goldman Sachs Clean is currently generating about -0.1 per unit of volatility. If you would invest  889.00  in Goldman Sachs Clean on November 29, 2024 and sell it today you would lose (51.00) from holding Goldman Sachs Clean or give up 5.74% of portfolio value over 90 days.

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

Short Precious Metals  vs.  Goldman Sachs Clean

Short Precious Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Short Precious Metals 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 Clean

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goldman Sachs Clean has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, 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 Short Precious and Goldman Sachs

The main advantage of trading using opposite Short Precious and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Precious 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 Short Precious Metals and Goldman Sachs Clean 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.