Correlation Between Exxon and Goldman Sachs

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

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

Diversification Opportunities for Exxon and Goldman Sachs

0.65

Correlation Coefficient

Exxon  Goldman Sachs

Poor diversification

The 3 months correlation between Exxon and Goldman is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Goldman Sachs MarketBeta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs MarketBeta and Exxon 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 Exxon Mobil Corp 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 MarketBeta has no effect on the direction of Exxon i.e., Exxon and Goldman Sachs go up and down completely randomly.

Pair Corralation between Exxon and Goldman Sachs

Considering the 90-day investment horizon Exxon Mobil Corp is expected to under-perform the Goldman Sachs. In addition to that, Exxon is 1.26 times more volatile than Goldman Sachs MarketBeta. It trades about -0.25 of its total potential returns per unit of risk. Goldman Sachs MarketBeta is currently generating about -0.28 per unit of volatility. If you would invest  4,522  in Goldman Sachs MarketBeta on October 12, 2024 and sell it today you would lose (181.00) from holding Goldman Sachs MarketBeta or give up 4.0% of portfolio value over 90 days.

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

Exxon Mobil Corp  vs.  Goldman Sachs MarketBeta

Exxon Mobil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exxon Mobil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Goldman Sachs MarketBeta

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs MarketBeta has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Exxon and Goldman Sachs

The main advantage of trading using opposite Exxon and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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 Exxon Mobil Corp and Goldman Sachs MarketBeta 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.