Correlation Between Tapestry and Goldman Sachs

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

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

Diversification Opportunities for Tapestry and Goldman Sachs

0.28

Correlation Coefficient

Tapestry  Goldman Sachs

Modest diversification

The 3 months correlation between Tapestry and Goldman is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Tapestry and Goldman Sachs Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Capital and Tapestry 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 Tapestry 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 Capital has no effect on the direction of Tapestry i.e., Tapestry and Goldman Sachs go up and down completely randomly.

Pair Corralation between Tapestry and Goldman Sachs

Considering the 90-day investment horizon Tapestry is expected to generate 1.57 times more return on investment than Goldman Sachs. However, Tapestry is 1.57 times more volatile than Goldman Sachs Capital. It trades about 0.3 of its potential returns per unit of risk. Goldman Sachs Capital is currently generating about 0.02 per unit of risk. If you would invest  4,949  in Tapestry on October 7, 2024 and sell it today you would earn a total of  1,728  from holding Tapestry or generate 34.92% return on investment over 90 days.

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

Tapestry  vs.  Goldman Sachs Capital

Tapestry

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tapestry are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Tapestry reported solid returns over the last few months and may actually be approaching a breakup point.

Goldman Sachs Capital

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Capital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Goldman Sachs is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Tapestry and Goldman Sachs

The main advantage of trading using opposite Tapestry and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tapestry 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 Tapestry and Goldman Sachs Capital 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.