Correlation Between Prudential Jennison and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Prudential Jennison 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 Prudential Jennison and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Jennison International and Goldman Sachs Gqg, you can compare the effects of market volatilities on Prudential Jennison 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 Prudential Jennison with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Jennison and Goldman Sachs.
Diversification Opportunities for Prudential Jennison and Goldman Sachs
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Prudential and Goldman is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Internatio and Goldman Sachs Gqg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Gqg and Prudential Jennison 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 Prudential Jennison International 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 Gqg has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Goldman Sachs go up and down completely randomly.
Pair Corralation between Prudential Jennison and Goldman Sachs
Assuming the 90 days horizon Prudential Jennison is expected to generate 1.75 times less return on investment than Goldman Sachs. In addition to that, Prudential Jennison is 1.4 times more volatile than Goldman Sachs Gqg. It trades about 0.02 of its total potential returns per unit of risk. Goldman Sachs Gqg is currently generating about 0.06 per unit of volatility. If you would invest 1,676 in Goldman Sachs Gqg on January 20, 2024 and sell it today you would earn a total of 494.00 from holding Goldman Sachs Gqg or generate 29.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Jennison Internatio vs. Goldman Sachs Gqg
Performance |
| Timeline |
| Prudential Jennison |
| Goldman Sachs Gqg |
Prudential Jennison and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Jennison and Goldman Sachs
The main advantage of trading using opposite Prudential Jennison and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Jennison 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 Prudential Jennison International and Goldman Sachs Gqg 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.
| Goldman Sachs vs. Goldman Sachs Clean | Goldman Sachs vs. Goldman Sachs Clean | Goldman Sachs vs. Goldman Sachs Clean | Goldman Sachs vs. Goldman Sachs Clean |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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