Correlation Between Ridgeworth Innovative and Goldman Sachs

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

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

Diversification Opportunities for Ridgeworth Innovative and Goldman Sachs

-0.23

Correlation Coefficient

Ridgeworth Innovative  Goldman Sachs

Very good diversification

The 3 months correlation between Ridgeworth and Goldman is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ridgeworth Innovative Growth and Goldman Sachs Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Short and Ridgeworth Innovative 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 Ridgeworth Innovative Growth 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 Short has no effect on the direction of Ridgeworth Innovative i.e., Ridgeworth Innovative and Goldman Sachs go up and down completely randomly.

Pair Corralation between Ridgeworth Innovative and Goldman Sachs

Assuming the 90 days horizon Ridgeworth Innovative Growth is expected to generate 10.3 times more return on investment than Goldman Sachs. However, Ridgeworth Innovative is 10.3 times more volatile than Goldman Sachs Short. It trades about 0.09 of its potential returns per unit of risk. Goldman Sachs Short is currently generating about 0.16 per unit of risk. If you would invest  3,741  in Ridgeworth Innovative Growth on September 12, 2024 and sell it today you would earn a total of  1,959  from holding Ridgeworth Innovative Growth or generate 52.37% return on investment over 90 days.

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

Ridgeworth Innovative Growth  vs.  Goldman Sachs Short

Ridgeworth Innovative

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ridgeworth Innovative Growth are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ridgeworth Innovative showed solid returns over the last few months and may actually be approaching a breakup point.

Goldman Sachs Short

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Short are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ridgeworth Innovative and Goldman Sachs

The main advantage of trading using opposite Ridgeworth Innovative and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ridgeworth Innovative 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 Ridgeworth Innovative Growth and Goldman Sachs Short 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.