Correlation Between Visa and Goldman Sachs

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

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

Diversification Opportunities for Visa and Goldman Sachs

0.66

Correlation Coefficient

Visa  Goldman Sachs

Poor diversification

The 3 months correlation between Visa and Goldman is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Goldman Sachs Tax Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Tax and Visa 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 Visa Class A 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 Tax has no effect on the direction of Visa i.e., Visa and Goldman Sachs go up and down completely randomly.

Pair Corralation between Visa and Goldman Sachs

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.11 times more return on investment than Goldman Sachs. However, Visa is 1.11 times more volatile than Goldman Sachs Tax Managed. It trades about 0.11 of its potential returns per unit of risk. Goldman Sachs Tax Managed is currently generating about 0.01 per unit of risk. If you would invest  28,983  in Visa Class A on October 17, 2024 and sell it today you would earn a total of  1,926  from holding Visa Class A or generate 6.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Visa Class A  vs.  Goldman Sachs Tax Managed

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Goldman Sachs Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Tax Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward 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 Visa and Goldman Sachs

The main advantage of trading using opposite Visa and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A and Goldman Sachs Tax Managed 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.