Correlation Between Goldman Sachs and Invesco Disciplined

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

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

Diversification Opportunities for Goldman Sachs and Invesco Disciplined

0.08

Correlation Coefficient

Goldman Sachs  Invesco Disciplined

Significant diversification

The 3 months correlation between Goldman and Invesco is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Emerging and Invesco Disciplined Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Disciplined and Goldman Sachs 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 Goldman Sachs Emerging are associated (or correlated) with Invesco Disciplined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Disciplined has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Invesco Disciplined go up and down completely randomly.

Pair Corralation between Goldman Sachs and Invesco Disciplined

Assuming the 90 days horizon Goldman Sachs is expected to generate 17.54 times less return on investment than Invesco Disciplined. In addition to that, Goldman Sachs is 1.47 times more volatile than Invesco Disciplined Equity. It trades about 0.01 of its total potential returns per unit of risk. Invesco Disciplined Equity is currently generating about 0.17 per unit of volatility. If you would invest  3,171  in Invesco Disciplined Equity on September 3, 2024 and sell it today you would earn a total of  235.00  from holding Invesco Disciplined Equity or generate 7.41% return on investment over 90 days.

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

Goldman Sachs Emerging  vs.  Invesco Disciplined Equity

Goldman Sachs Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Emerging has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Disciplined

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Disciplined Equity are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Invesco Disciplined may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Goldman Sachs and Invesco Disciplined

The main advantage of trading using opposite Goldman Sachs and Invesco Disciplined positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goldman Sachs position performs unexpectedly, Invesco Disciplined 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 Invesco Disciplined will offset losses from the drop in Invesco Disciplined's long position.

The idea behind Goldman Sachs Emerging and Invesco Disciplined 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.