Correlation Between Doman Building and GOLDMAN SACHS

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

By analyzing existing cross correlation between Doman Building Materials and GOLDMAN SACHS CDR, you can compare the effects of market volatilities on Doman Building 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 Doman Building with a short position of GOLDMAN SACHS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Doman Building and GOLDMAN SACHS.

Diversification Opportunities for Doman Building and GOLDMAN SACHS

0.76

Correlation Coefficient

Doman Building  GOLDMAN SACHS

Poor diversification

The 3 months correlation between Doman and GOLDMAN is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Doman Building Materials and GOLDMAN SACHS CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOLDMAN SACHS CDR and Doman Building 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 Doman Building Materials 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 CDR has no effect on the direction of Doman Building i.e., Doman Building and GOLDMAN SACHS go up and down completely randomly.

Pair Corralation between Doman Building and GOLDMAN SACHS

Assuming the 90 days trading horizon Doman Building Materials is expected to under-perform the GOLDMAN SACHS. But the stock apears to be less risky and, when comparing its historical volatility, Doman Building Materials is 1.05 times less risky than GOLDMAN SACHS. The stock trades about -0.33 of its potential returns per unit of risk. The GOLDMAN SACHS CDR is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  2,992  in GOLDMAN SACHS CDR on September 25, 2024 and sell it today you would lose (150.00) from holding GOLDMAN SACHS CDR or give up 5.01% of portfolio value over 90 days.

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

Doman Building Materials  vs.  GOLDMAN SACHS CDR

Doman Building Materials

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Doman Building Materials are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, Doman Building displayed solid returns over the last few months and may actually be approaching a breakup point.

GOLDMAN SACHS CDR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GOLDMAN SACHS CDR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, GOLDMAN SACHS displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Doman Building and GOLDMAN SACHS

The main advantage of trading using opposite Doman Building and GOLDMAN SACHS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Doman Building 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's long position.

The idea behind Doman Building Materials and GOLDMAN SACHS CDR 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.