Correlation Between Cazoo and Goldman Sachs

Can any of the company-specific risk be diversified away by investing in both Cazoo 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 Cazoo and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cazoo Group and Goldman Sachs Centrated, you can compare the effects of market volatilities on Cazoo 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 Cazoo with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cazoo and Goldman Sachs.

Diversification Opportunities for Cazoo and Goldman Sachs

-0.03

Correlation Coefficient

Cazoo  Goldman Sachs

Good diversification

The 3 months correlation between Cazoo and Goldman is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Cazoo Group and Goldman Sachs Centrated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Centrated and Cazoo 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 Cazoo Group 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 Centrated has no effect on the direction of Cazoo i.e., Cazoo and Goldman Sachs go up and down completely randomly.

Pair Corralation between Cazoo and Goldman Sachs

Given the investment horizon of 90 days Cazoo Group is expected to generate 1.23 times more return on investment than Goldman Sachs. However, Cazoo is 1.23 times more volatile than Goldman Sachs Centrated. It trades about 0.15 of its potential returns per unit of risk. Goldman Sachs Centrated is currently generating about 0.07 per unit of risk. If you would invest  906.00  in Cazoo Group on January 29, 2024 and sell it today you would earn a total of  283.00  from holding Cazoo Group or generate 31.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cazoo Group  vs.  Goldman Sachs Centrated

Cazoo Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cazoo Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Cazoo displayed solid returns over the last few months and may actually be approaching a breakup point.

Goldman Sachs Centrated

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Centrated are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Goldman Sachs showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cazoo and Goldman Sachs

The main advantage of trading using opposite Cazoo and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cazoo 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 Cazoo Group and Goldman Sachs Centrated 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.