Correlation Between Tax Exempt and Goldman Sachs

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

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

Diversification Opportunities for Tax Exempt and Goldman Sachs

0.62

Correlation Coefficient

Tax Exempt  Goldman Sachs

Poor diversification

The 3 months correlation between Tax and Goldman is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Tax Exempt Fund Of and Goldman Sachs Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Short and Tax Exempt 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 Tax Exempt Fund Of 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 Short has no effect on the direction of Tax Exempt i.e., Tax Exempt and Goldman Sachs go up and down completely randomly.

Pair Corralation between Tax Exempt and Goldman Sachs

Assuming the 90 days horizon Tax Exempt Fund Of is expected to under-perform the Goldman Sachs. In addition to that, Tax Exempt is 2.06 times more volatile than Goldman Sachs Short. It trades about -0.04 of its total potential returns per unit of risk. Goldman Sachs Short is currently generating about 0.21 per unit of volatility. If you would invest  960.00  in Goldman Sachs Short on December 30, 2024 and sell it today you would earn a total of  14.00  from holding Goldman Sachs Short or generate 1.46% return on investment over 90 days.

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

Tax Exempt Fund Of  vs.  Goldman Sachs Short

Tax Exempt Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tax Exempt Fund Of has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Tax Exempt is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Short are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental 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 Tax Exempt and Goldman Sachs

The main advantage of trading using opposite Tax Exempt and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tax Exempt 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 Tax Exempt Fund Of and Goldman Sachs Short 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.