Correlation Between Goldman Sachs and Cullen Enhanced

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

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

Diversification Opportunities for Goldman Sachs and Cullen Enhanced

0.73

Correlation Coefficient

Goldman Sachs  Cullen Enhanced

Poor diversification

The 3 months correlation between Goldman and Cullen is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Equity and Cullen Enhanced Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cullen Enhanced Equity 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 Equity are associated (or correlated) with Cullen Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cullen Enhanced Equity has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Cullen Enhanced go up and down completely randomly.

Pair Corralation between Goldman Sachs and Cullen Enhanced

Assuming the 90 days horizon Goldman Sachs Equity is expected to generate 0.96 times more return on investment than Cullen Enhanced. However, Goldman Sachs Equity is 1.04 times less risky than Cullen Enhanced. It trades about 0.22 of its potential returns per unit of risk. Cullen Enhanced Equity is currently generating about 0.05 per unit of risk. If you would invest  1,707  in Goldman Sachs Equity on September 12, 2024 and sell it today you would earn a total of  117.00  from holding Goldman Sachs Equity or generate 6.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Goldman Sachs Equity  vs.  Cullen Enhanced Equity

Goldman Sachs Equity

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Equity are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Goldman Sachs may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cullen Enhanced Equity

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cullen Enhanced Equity are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Cullen Enhanced 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 Cullen Enhanced

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

The idea behind Goldman Sachs Equity and Cullen Enhanced 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.