Correlation Between ESH Acquisition and Goldman Sachs

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

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

Diversification Opportunities for ESH Acquisition and Goldman Sachs

-0.79

Correlation Coefficient

ESH Acquisition  Goldman Sachs

Pay attention - limited upside

The 3 months correlation between ESH and Goldman is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding ESH Acquisition Corp and Goldman Sachs BDC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs BDC and ESH Acquisition 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 ESH Acquisition Corp 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 BDC has no effect on the direction of ESH Acquisition i.e., ESH Acquisition and Goldman Sachs go up and down completely randomly.

Pair Corralation between ESH Acquisition and Goldman Sachs

Given the investment horizon of 90 days ESH Acquisition is expected to generate 2.17 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, ESH Acquisition Corp is 5.51 times less risky than Goldman Sachs. It trades about 0.08 of its potential returns per unit of risk. Goldman Sachs BDC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,138  in Goldman Sachs BDC on September 1, 2024 and sell it today you would earn a total of  169.00  from holding Goldman Sachs BDC or generate 14.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	74.55%
Values	Daily Returns

ESH Acquisition Corp  vs.  Goldman Sachs BDC

ESH Acquisition Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ESH Acquisition Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, ESH Acquisition is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs BDC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs BDC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Goldman Sachs is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ESH Acquisition and Goldman Sachs

The main advantage of trading using opposite ESH Acquisition and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESH Acquisition 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 ESH Acquisition Corp and Goldman Sachs BDC 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.