Correlation Between Absolute Convertible and Goldman Sachs

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

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

Diversification Opportunities for Absolute Convertible and Goldman Sachs

0.92

Correlation Coefficient

Absolute Convertible  Goldman Sachs

Almost no diversification

The 3 months correlation between Absolute and Goldman is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage 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 Absolute Convertible 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 Absolute Convertible Arbitrage 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 Absolute Convertible i.e., Absolute Convertible and Goldman Sachs go up and down completely randomly.

Pair Corralation between Absolute Convertible and Goldman Sachs

Assuming the 90 days horizon Absolute Convertible is expected to generate 9.71 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Absolute Convertible Arbitrage is 18.46 times less risky than Goldman Sachs. It trades about 0.58 of its potential returns per unit of risk. Goldman Sachs Large is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  3,517  in Goldman Sachs Large on September 1, 2024 and sell it today you would earn a total of  222.00  from holding Goldman Sachs Large or generate 6.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Absolute Convertible Arbitrage  vs.  Goldman Sachs Large

Absolute Convertible

Risk-Adjusted Performance

46 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Absolute Convertible Arbitrage are ranked lower than 46 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Absolute Convertible is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs Large

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Large are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Goldman Sachs may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Absolute Convertible and Goldman Sachs

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

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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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.