Correlation Between JPMorgan Equity and Goldman Sachs

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

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

Diversification Opportunities for JPMorgan Equity and Goldman Sachs

0.97

Correlation Coefficient

JPMorgan Equity  Goldman Sachs

Almost no diversification

The 3 months correlation between JPMorgan and Goldman is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Equity Premium and Goldman Sachs SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs SP and JPMorgan Equity 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 JPMorgan Equity Premium are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs SP has no effect on the direction of JPMorgan Equity i.e., JPMorgan Equity and Goldman Sachs go up and down completely randomly.

Pair Corralation between JPMorgan Equity and Goldman Sachs

Given the investment horizon of 90 days JPMorgan Equity is expected to generate 1.39 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, JPMorgan Equity Premium is 1.54 times less risky than Goldman Sachs. It trades about 0.24 of its potential returns per unit of risk. Goldman Sachs SP is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  4,668  in Goldman Sachs SP on September 2, 2024 and sell it today you would earn a total of  398.00  from holding Goldman Sachs SP or generate 8.53% return on investment over 90 days.

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

JPMorgan Equity Premium  vs.  Goldman Sachs SP

JPMorgan Equity Premium

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Equity Premium are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, JPMorgan Equity is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Goldman Sachs SP

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with JPMorgan Equity and Goldman Sachs

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

The idea behind JPMorgan Equity Premium and Goldman Sachs SP 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.