Correlation Between Goldman Sachs and International Business

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

Diversification Opportunities for Goldman Sachs and International Business

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Goldman and International is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding GOLDMAN SACHS CENTRATED and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 Centrated are associated (or correlated) with International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and International Business go up and down completely randomly.

Pair Corralation between Goldman Sachs and International Business

Assuming the 90 days horizon Goldman Sachs is expected to generate 1.74 times less return on investment than International Business. But when comparing it to its historical volatility, Goldman Sachs Centrated is 1.42 times less risky than International Business. It trades about 0.12 of its potential returns per unit of risk. International Business Machines is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  14,387  in International Business Machines on December 29, 2023 and sell it today you would earn a total of  4,709  from holding International Business Machines or generate 32.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

GOLDMAN SACHS CENTRATED  vs.  International Business Machine

 Performance 
       Timeline  
Goldman Sachs Centrated 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Centrated are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Goldman Sachs may actually be approaching a critical reversion point that can send shares even higher in April 2024.
International Business 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental drivers, International Business displayed solid returns over the last few months and may actually be approaching a breakup point.

Goldman Sachs and International Business Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Goldman Sachs and International Business

The main advantage of trading using opposite Goldman Sachs and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goldman Sachs position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.
The idea behind Goldman Sachs Centrated and International Business Machines 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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