Correlation Between VCLO and Goldman Sachs

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

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

Diversification Opportunities for VCLO and Goldman Sachs

-0.35

Correlation Coefficient

VCLO  Goldman Sachs

Very good diversification

The 3 months correlation between VCLO and Goldman is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding VCLO and Goldman Sachs Innovate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Innovate and VCLO 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 VCLO 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 Innovate has no effect on the direction of VCLO i.e., VCLO and Goldman Sachs go up and down completely randomly.

Pair Corralation between VCLO and Goldman Sachs

If you would invest  6,252  in Goldman Sachs Innovate on October 22, 2024 and sell it today you would earn a total of  40.40  from holding Goldman Sachs Innovate or generate 0.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	5.26%
Values	Daily Returns

VCLO  vs.  Goldman Sachs Innovate

VCLO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VCLO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, VCLO is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Goldman Sachs Innovate

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Innovate are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Goldman Sachs is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with VCLO and Goldman Sachs

The main advantage of trading using opposite VCLO and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VCLO 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 VCLO and Goldman Sachs Innovate 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.