Correlation Between Health Biotchnology and Goldman Sachs

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

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

Diversification Opportunities for Health Biotchnology and Goldman Sachs

0.48

Correlation Coefficient

Health Biotchnology  Goldman Sachs

Very weak diversification

The 3 months correlation between Health and Goldman is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Health Biotchnology Portfolio 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 Health Biotchnology 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 Health Biotchnology Portfolio 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 Health Biotchnology i.e., Health Biotchnology and Goldman Sachs go up and down completely randomly.

Pair Corralation between Health Biotchnology and Goldman Sachs

Assuming the 90 days horizon Health Biotchnology Portfolio is expected to under-perform the Goldman Sachs. In addition to that, Health Biotchnology is 6.47 times more volatile than Goldman Sachs Short. It trades about -0.15 of its total potential returns per unit of risk. Goldman Sachs Short is currently generating about -0.01 per unit of volatility. If you would invest  973.00  in Goldman Sachs Short on September 13, 2024 and sell it today you would lose (1.00) from holding Goldman Sachs Short or give up 0.1% of portfolio value over 90 days.

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

Health Biotchnology Portfolio  vs.  Goldman Sachs Short

Health Biotchnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health Biotchnology Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Goldman Sachs Short

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Short has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic 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 Health Biotchnology and Goldman Sachs

The main advantage of trading using opposite Health Biotchnology and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Biotchnology 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 Health Biotchnology Portfolio 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..