Correlation Between Snap and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Snap 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 Snap and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Goldman Sachs Large, you can compare the effects of market volatilities on Snap 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 Snap with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Goldman Sachs.
Diversification Opportunities for Snap and Goldman Sachs
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Snap and Goldman is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Goldman Sachs Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Large and Snap 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 Snap Inc 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 Large has no effect on the direction of Snap i.e., Snap and Goldman Sachs go up and down completely randomly.
Pair Corralation between Snap and Goldman Sachs
Given the investment horizon of 90 days Snap Inc is expected to generate 5.16 times more return on investment than Goldman Sachs. However, Snap is 5.16 times more volatile than Goldman Sachs Large. It trades about 0.03 of its potential returns per unit of risk. Goldman Sachs Large is currently generating about 0.07 per unit of risk. If you would invest 1,010 in Snap Inc on August 26, 2024 and sell it today you would earn a total of 132.00 from holding Snap Inc or generate 13.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. Goldman Sachs Large
Performance |
| Timeline |
| Snap Inc |
| Goldman Sachs Large |
Snap and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Goldman Sachs
The main advantage of trading using opposite Snap and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap 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 Snap Inc and Goldman Sachs Large 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. Goldman Sachs Clean | Goldman Sachs vs. Goldman Sachs Clean | Goldman Sachs vs. Goldman Sachs Clean | Goldman Sachs vs. Goldman Sachs Clean |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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