Correlation Between Cutler Equity and Goldman Sachs

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

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

Diversification Opportunities for Cutler Equity and Goldman Sachs

0.87

Correlation Coefficient

Cutler Equity  Goldman Sachs

Very poor diversification

The 3 months correlation between Cutler and Goldman is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Cutler Equity and Goldman Sachs Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Equity and Cutler Equity 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 Cutler Equity 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 Equity has no effect on the direction of Cutler Equity i.e., Cutler Equity and Goldman Sachs go up and down completely randomly.

Pair Corralation between Cutler Equity and Goldman Sachs

Assuming the 90 days horizon Cutler Equity is expected to generate 1.48 times more return on investment than Goldman Sachs. However, Cutler Equity is 1.48 times more volatile than Goldman Sachs Equity. It trades about 0.08 of its potential returns per unit of risk. Goldman Sachs Equity is currently generating about 0.08 per unit of risk. If you would invest  2,874  in Cutler Equity on September 12, 2024 and sell it today you would earn a total of  25.00  from holding Cutler Equity or generate 0.87% return on investment over 90 days.

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

Cutler Equity  vs.  Goldman Sachs Equity

Cutler Equity

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cutler Equity are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Cutler Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs Equity

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Equity are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Goldman Sachs may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cutler Equity and Goldman Sachs

The main advantage of trading using opposite Cutler Equity and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cutler Equity 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 Cutler Equity and Goldman Sachs Equity 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.