Correlation Between Goldman Sachs and BMO Long

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

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

Diversification Opportunities for Goldman Sachs and BMO Long

0.14

Correlation Coefficient

Goldman Sachs  BMO Long

Average diversification

The 3 months correlation between Goldman and BMO is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs ActiveBeta and BMO Long Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Long Federal 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 ActiveBeta are associated (or correlated) with BMO Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Long Federal has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and BMO Long go up and down completely randomly.

Pair Corralation between Goldman Sachs and BMO Long

Given the investment horizon of 90 days Goldman Sachs is expected to generate 9.32 times less return on investment than BMO Long. But when comparing it to its historical volatility, Goldman Sachs ActiveBeta is 1.8 times less risky than BMO Long. It trades about 0.01 of its potential returns per unit of risk. BMO Long Federal is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,330  in BMO Long Federal on September 12, 2024 and sell it today you would earn a total of  15.00  from holding BMO Long Federal or generate 1.13% return on investment over 90 days.

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

Goldman Sachs ActiveBeta  vs.  BMO Long Federal

Goldman Sachs ActiveBeta

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs ActiveBeta are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Goldman Sachs is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

BMO Long Federal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BMO Long Federal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, BMO Long is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Goldman Sachs and BMO Long

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

The idea behind Goldman Sachs ActiveBeta and BMO Long Federal 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.