Correlation Between Goldman Sachs and Pace International

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

By analyzing existing cross correlation between Goldman Sachs Technology and Pace International Emerging, you can compare the effects of market volatilities on Goldman Sachs and Pace International 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 Pace International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and Pace International.

Diversification Opportunities for Goldman Sachs and Pace International

0.31

Correlation Coefficient

Goldman Sachs  Pace International

Weak diversification

The 3 months correlation between GOLDMAN and Pace is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Technology and Pace International Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace International 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 Technology are associated (or correlated) with Pace International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace International has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Pace International go up and down completely randomly.

Pair Corralation between Goldman Sachs and Pace International

Assuming the 90 days horizon Goldman Sachs Technology is expected to generate 1.61 times more return on investment than Pace International. However, Goldman Sachs is 1.61 times more volatile than Pace International Emerging. It trades about 0.14 of its potential returns per unit of risk. Pace International Emerging is currently generating about -0.2 per unit of risk. If you would invest  2,771  in Goldman Sachs Technology on August 31, 2024 and sell it today you would earn a total of  100.00  from holding Goldman Sachs Technology or generate 3.61% return on investment over 90 days.

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

Goldman Sachs Technology  vs.  Pace International Emerging

Goldman Sachs Technology

Risk-Adjusted Performance

15 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Technology are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Goldman Sachs showed solid returns over the last few months and may actually be approaching a breakup point.

Pace International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pace International Emerging are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Pace International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Goldman Sachs and Pace International

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

The idea behind Goldman Sachs Technology and Pace International Emerging 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.