Correlation Between JPMorgan BetaBuilders and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both JPMorgan BetaBuilders 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 JPMorgan BetaBuilders and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JPMorgan BetaBuilders Europe and Goldman Sachs ActiveBeta, you can compare the effects of market volatilities on JPMorgan BetaBuilders 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 JPMorgan BetaBuilders with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan BetaBuilders and Goldman Sachs.
Diversification Opportunities for JPMorgan BetaBuilders and Goldman Sachs
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between JPMorgan and Goldman is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan BetaBuilders Europe and Goldman Sachs ActiveBeta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs ActiveBeta and JPMorgan BetaBuilders 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 JPMorgan BetaBuilders Europe 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 ActiveBeta has no effect on the direction of JPMorgan BetaBuilders i.e., JPMorgan BetaBuilders and Goldman Sachs go up and down completely randomly.
Pair Corralation between JPMorgan BetaBuilders and Goldman Sachs
Given the investment horizon of 90 days JPMorgan BetaBuilders is expected to generate 1.02 times less return on investment than Goldman Sachs. In addition to that, JPMorgan BetaBuilders is 1.02 times more volatile than Goldman Sachs ActiveBeta. It trades about 0.05 of its total potential returns per unit of risk. Goldman Sachs ActiveBeta is currently generating about 0.05 per unit of volatility. If you would invest 2,913 in Goldman Sachs ActiveBeta on September 3, 2024 and sell it today you would earn a total of 661.00 from holding Goldman Sachs ActiveBeta or generate 22.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
JPMorgan BetaBuilders Europe vs. Goldman Sachs ActiveBeta
Performance |
| Timeline |
| JPMorgan BetaBuilders |
| Goldman Sachs ActiveBeta |
JPMorgan BetaBuilders and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JPMorgan BetaBuilders and Goldman Sachs
The main advantage of trading using opposite JPMorgan BetaBuilders and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan BetaBuilders 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 JPMorgan BetaBuilders Europe and Goldman Sachs ActiveBeta 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.
| Goldman Sachs vs. Vanguard FTSE Pacific | Goldman Sachs vs. Vanguard FTSE Emerging | Goldman Sachs vs. Vanguard FTSE All World | Goldman Sachs vs. Vanguard FTSE Developed |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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