Correlation Between Gmo High and Goldman Sachs

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Can any of the company-specific risk be diversified away by investing in both Gmo High 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 Gmo High and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo High Yield and Goldman Sachs Technology, you can compare the effects of market volatilities on Gmo High 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 Gmo High with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and Goldman Sachs.

Diversification Opportunities for Gmo High and Goldman Sachs

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between GMO and Goldman is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and Goldman Sachs Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Technology and Gmo High 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 Gmo High Yield 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 Technology has no effect on the direction of Gmo High i.e., Gmo High and Goldman Sachs go up and down completely randomly.

Pair Corralation between Gmo High and Goldman Sachs

Assuming the 90 days horizon Gmo High is expected to generate 7.74 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Gmo High Yield is 5.92 times less risky than Goldman Sachs. It trades about 0.18 of its potential returns per unit of risk. Goldman Sachs Technology is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,655  in Goldman Sachs Technology on September 5, 2024 and sell it today you would earn a total of  283.00  from holding Goldman Sachs Technology or generate 10.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Gmo High Yield  vs.  Goldman Sachs Technology

 Performance 
       Timeline  
Gmo High Yield 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Gmo High Yield are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gmo High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Goldman Sachs Technology 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Technology are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Goldman Sachs showed solid returns over the last few months and may actually be approaching a breakup point.

Gmo High and Goldman Sachs Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gmo High and Goldman Sachs

The main advantage of trading using opposite Gmo High and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo High 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 Gmo High Yield and Goldman Sachs Technology 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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