Correlation Between Scout E and Goldman Sachs

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

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

Diversification Opportunities for Scout E and Goldman Sachs

0.33

Correlation Coefficient

Scout E  Goldman Sachs

Weak diversification

The 3 months correlation between Scout and Goldman is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Scout E Bond and Goldman Sachs Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Enhanced and Scout E 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 Scout E Bond 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 Enhanced has no effect on the direction of Scout E i.e., Scout E and Goldman Sachs go up and down completely randomly.

Pair Corralation between Scout E and Goldman Sachs

Assuming the 90 days horizon Scout E is expected to generate 6.1 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Scout E Bond is 1.54 times less risky than Goldman Sachs. It trades about 0.02 of its potential returns per unit of risk. Goldman Sachs Enhanced is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,102  in Goldman Sachs Enhanced on September 29, 2024 and sell it today you would earn a total of  291.00  from holding Goldman Sachs Enhanced or generate 26.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Scout E Bond  vs.  Goldman Sachs Enhanced

Scout E Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scout E Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Scout E is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs Enhanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Enhanced has generated negative risk-adjusted returns adding no value to fund investors. 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 Scout E and Goldman Sachs

The main advantage of trading using opposite Scout E and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scout E 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 Scout E Bond and Goldman Sachs Enhanced 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.