Correlation Between Goldman Sachs and ARMOUR Residential
Can any of the company-specific risk be diversified away by investing in both Goldman Sachs and ARMOUR Residential 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 Goldman Sachs and ARMOUR Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Goldman Sachs Group and ARMOUR Residential REIT, you can compare the effects of market volatilities on Goldman Sachs and ARMOUR Residential 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 Goldman Sachs with a short position of ARMOUR Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and ARMOUR Residential.
Diversification Opportunities for Goldman Sachs and ARMOUR Residential
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Goldman and ARMOUR is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Group and ARMOUR Residential REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARMOUR Residential REIT and Goldman Sachs 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 Goldman Sachs Group are associated (or correlated) with ARMOUR Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARMOUR Residential REIT has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and ARMOUR Residential go up and down completely randomly.
Pair Corralation between Goldman Sachs and ARMOUR Residential
Allowing for the 90-day total investment horizon Goldman Sachs Group is expected to generate 1.06 times more return on investment than ARMOUR Residential. However, Goldman Sachs is 1.06 times more volatile than ARMOUR Residential REIT. It trades about 0.13 of its potential returns per unit of risk. ARMOUR Residential REIT is currently generating about 0.05 per unit of risk. If you would invest 36,750 in Goldman Sachs Group on September 12, 2024 and sell it today you would earn a total of 22,506 from holding Goldman Sachs Group or generate 61.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goldman Sachs Group vs. ARMOUR Residential REIT
Performance |
| Timeline |
| Goldman Sachs Group |
| ARMOUR Residential REIT |
Goldman Sachs and ARMOUR Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goldman Sachs and ARMOUR Residential
The main advantage of trading using opposite Goldman Sachs and ARMOUR Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goldman Sachs position performs unexpectedly, ARMOUR Residential 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 ARMOUR Residential will offset losses from the drop in ARMOUR Residential's long position.| Goldman Sachs vs. Morgan Stanley | Goldman Sachs vs. JPMorgan Chase Co | Goldman Sachs vs. Wells Fargo | Goldman Sachs vs. Citigroup |
| ARMOUR Residential vs. Ellington Financial | ARMOUR Residential vs. Two Harbors Investments | ARMOUR Residential vs. Dynex Capital | ARMOUR Residential vs. Ellington Residential Mortgage |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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