Correlation Between 532716AN7 and Goldman Sachs

Can any of the company-specific risk be diversified away by investing in both 532716AN7 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 532716AN7 and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between L Brands 76 and Goldman Sachs Group, you can compare the effects of market volatilities on 532716AN7 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 532716AN7 with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of 532716AN7 and Goldman Sachs.

Diversification Opportunities for 532716AN7 and Goldman Sachs

0.38

Correlation Coefficient

532716AN7  Goldman Sachs

Weak diversification

The 3 months correlation between 532716AN7 and Goldman is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding L Brands 76 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 532716AN7 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 L Brands 76 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 532716AN7 i.e., 532716AN7 and Goldman Sachs go up and down completely randomly.

Pair Corralation between 532716AN7 and Goldman Sachs

Assuming the 90 days trading horizon L Brands 76 is expected to generate 0.43 times more return on investment than Goldman Sachs. However, L Brands 76 is 2.32 times less risky than Goldman Sachs. It trades about 0.03 of its potential returns per unit of risk. Goldman Sachs Group is currently generating about -0.01 per unit of risk. If you would invest  10,190  in L Brands 76 on December 24, 2024 and sell it today you would earn a total of  109.00  from holding L Brands 76 or generate 1.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	81.97%
Values	Daily Returns

L Brands 76  vs.  Goldman Sachs Group

L Brands 76

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in L Brands 76 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 532716AN7 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

Very Weak

Over the last 90 days Goldman Sachs Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Goldman Sachs is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with 532716AN7 and Goldman Sachs

The main advantage of trading using opposite 532716AN7 and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 532716AN7 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 L Brands 76 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.

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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.