Correlation Between MARKET VECTR and Goldman Sachs

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

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

Diversification Opportunities for MARKET VECTR and Goldman Sachs

0.91

Correlation Coefficient

MARKET VECTR  Goldman Sachs

Almost no diversification

The 3 months correlation between MARKET and Goldman is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding MARKET VECTR RETAIL and The Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs and MARKET VECTR 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 MARKET VECTR RETAIL 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 has no effect on the direction of MARKET VECTR i.e., MARKET VECTR and Goldman Sachs go up and down completely randomly.

Pair Corralation between MARKET VECTR and Goldman Sachs

Assuming the 90 days trading horizon MARKET VECTR is expected to generate 2.0 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, MARKET VECTR RETAIL is 2.74 times less risky than Goldman Sachs. It trades about 0.21 of its potential returns per unit of risk. The Goldman Sachs is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  44,875  in The Goldman Sachs on October 6, 2024 and sell it today you would earn a total of  11,035  from holding The Goldman Sachs or generate 24.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	93.44%
Values	Daily Returns

MARKET VECTR RETAIL  vs.  The Goldman Sachs

MARKET VECTR RETAIL

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MARKET VECTR RETAIL are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, MARKET VECTR may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Goldman Sachs

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Goldman Sachs are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Goldman Sachs reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MARKET VECTR and Goldman Sachs

The main advantage of trading using opposite MARKET VECTR and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MARKET VECTR 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 MARKET VECTR RETAIL and The Goldman Sachs 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.