Correlation Between INTERNATIONAL and Goldman Sachs

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

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

Diversification Opportunities for INTERNATIONAL and Goldman Sachs

-0.17

Correlation Coefficient

INTERNATIONAL  Goldman Sachs

Good diversification

The 3 months correlation between INTERNATIONAL and Goldman is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding INTERNATIONAL FLAVORS FRAGRANC and Goldman Sachs Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Group and INTERNATIONAL 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 INTERNATIONAL FLAVORS FRAGRANCES 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 Group has no effect on the direction of INTERNATIONAL i.e., INTERNATIONAL and Goldman Sachs go up and down completely randomly.

Pair Corralation between INTERNATIONAL and Goldman Sachs

Assuming the 90 days trading horizon INTERNATIONAL FLAVORS FRAGRANCES is expected to under-perform the Goldman Sachs. But the bond apears to be less risky and, when comparing its historical volatility, INTERNATIONAL FLAVORS FRAGRANCES is 1.32 times less risky than Goldman Sachs. The bond trades about -0.12 of its potential returns per unit of risk. The Goldman Sachs Group is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  59,412  in Goldman Sachs Group on October 10, 2024 and sell it today you would lose (1,400) from holding Goldman Sachs Group or give up 2.36% of portfolio value over 90 days.

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

INTERNATIONAL FLAVORS FRAGRANC  vs.  Goldman Sachs Group

INTERNATIONAL FLAVORS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INTERNATIONAL FLAVORS FRAGRANCES has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, INTERNATIONAL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INTERNATIONAL and Goldman Sachs

The main advantage of trading using opposite INTERNATIONAL and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INTERNATIONAL 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 INTERNATIONAL FLAVORS FRAGRANCES and Goldman Sachs Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.