Correlation Between International Government and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both International Government 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 International Government and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Government Bond and Goldman Sachs Clean, you can compare the effects of market volatilities on International Government 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 International Government with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Government and Goldman Sachs.
Diversification Opportunities for International Government and Goldman Sachs
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between International and Goldman is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding International Government Bond and Goldman Sachs Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Clean and International Government 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 International Government Bond 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 Clean has no effect on the direction of International Government i.e., International Government and Goldman Sachs go up and down completely randomly.
Pair Corralation between International Government and Goldman Sachs
Assuming the 90 days horizon International Government Bond is expected to generate 0.25 times more return on investment than Goldman Sachs. However, International Government Bond is 3.93 times less risky than Goldman Sachs. It trades about 0.11 of its potential returns per unit of risk. Goldman Sachs Clean is currently generating about -0.11 per unit of risk. If you would invest 1,008 in International Government Bond on September 2, 2024 and sell it today you would earn a total of 9.00 from holding International Government Bond or generate 0.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Government Bond vs. Goldman Sachs Clean
Performance |
| Timeline |
| International Government |
| Goldman Sachs Clean |
International Government and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Government and Goldman Sachs
The main advantage of trading using opposite International Government and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Government 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.| International Government vs. Mid Cap Index | International Government vs. Mid Cap Strategic | International Government vs. Valic Company I | International Government vs. Valic Company I |
| Goldman Sachs vs. Goldman Sachs Clean | Goldman Sachs vs. Goldman Sachs Clean | Goldman Sachs vs. Goldman Sachs Clean | Goldman Sachs vs. Goldman Sachs Centrated |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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