Correlation Between Ford and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Goldman Sachs Growth, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Goldman Sachs.
Diversification Opportunities for Ford and Goldman Sachs
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Goldman is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Goldman Sachs Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Growth and Ford 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 Ford Motor 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 Growth has no effect on the direction of Ford i.e., Ford and Goldman Sachs go up and down completely randomly.
Pair Corralation between Ford and Goldman Sachs
Taking into account the 90-day investment horizon Ford is expected to generate 1.54 times less return on investment than Goldman Sachs. In addition to that, Ford is 4.34 times more volatile than Goldman Sachs Growth. It trades about 0.01 of its total potential returns per unit of risk. Goldman Sachs Growth is currently generating about 0.1 per unit of volatility. If you would invest 1,288 in Goldman Sachs Growth on August 31, 2024 and sell it today you would earn a total of 355.00 from holding Goldman Sachs Growth or generate 27.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Ford Motor vs. Goldman Sachs Growth
Performance |
| Timeline |
| Ford Motor |
| Goldman Sachs Growth |
Ford and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Goldman Sachs
The main advantage of trading using opposite Ford and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor and Goldman Sachs Growth 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. Gabelli Global Financial | Goldman Sachs vs. 1919 Financial Services | Goldman Sachs vs. Prudential Jennison Financial | Goldman Sachs vs. Goldman Sachs Financial |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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