Correlation Between Investec Global and Goldman Sachs

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

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

Diversification Opportunities for Investec Global and Goldman Sachs

0.19

Correlation Coefficient

Investec Global  Goldman Sachs

Average diversification

The 3 months correlation between Investec and Goldman is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Investec Global Franchise and Goldman Sachs Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Small and Investec Global 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 Investec Global Franchise 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 Small has no effect on the direction of Investec Global i.e., Investec Global and Goldman Sachs go up and down completely randomly.

Pair Corralation between Investec Global and Goldman Sachs

Assuming the 90 days horizon Investec Global Franchise is expected to generate 0.2 times more return on investment than Goldman Sachs. However, Investec Global Franchise is 5.09 times less risky than Goldman Sachs. It trades about 0.02 of its potential returns per unit of risk. Goldman Sachs Small is currently generating about -0.31 per unit of risk. If you would invest  1,783  in Investec Global Franchise on September 25, 2024 and sell it today you would earn a total of  5.00  from holding Investec Global Franchise or generate 0.28% return on investment over 90 days.

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

Investec Global Franchise  vs.  Goldman Sachs Small

Investec Global Franchise

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Investec Global Franchise are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Investec Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Investec Global and Goldman Sachs

The main advantage of trading using opposite Investec Global and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investec Global 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 Investec Global Franchise and Goldman Sachs Small 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.