Correlation Between Goldman Sachs and Tradeweb Markets

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

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

Diversification Opportunities for Goldman Sachs and Tradeweb Markets

0.65

Correlation Coefficient

Goldman Sachs  Tradeweb Markets

Poor diversification

The 3 months correlation between Goldman and Tradeweb is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Group and Tradeweb Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tradeweb Markets 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 Group are associated (or correlated) with Tradeweb Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tradeweb Markets has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Tradeweb Markets go up and down completely randomly.

Pair Corralation between Goldman Sachs and Tradeweb Markets

Allowing for the 90-day total investment horizon Goldman Sachs Group is expected to generate 1.24 times more return on investment than Tradeweb Markets. However, Goldman Sachs is 1.24 times more volatile than Tradeweb Markets. It trades about 0.15 of its potential returns per unit of risk. Tradeweb Markets is currently generating about 0.12 per unit of risk. If you would invest  34,344  in Goldman Sachs Group on September 4, 2024 and sell it today you would earn a total of  25,864  from holding Goldman Sachs Group or generate 75.31% return on investment over 90 days.

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

Goldman Sachs Group  vs.  Tradeweb Markets

Goldman Sachs Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Tradeweb Markets

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tradeweb Markets are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Tradeweb Markets showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goldman Sachs and Tradeweb Markets

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

The idea behind Goldman Sachs Group and Tradeweb Markets 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.