# Correlation Between DOW and Goldman Sachs

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

### Specify exactly 2 symbols:^DJIGGJPXAdd Two Equities

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

## Diversification Opportunities for DOW and Goldman Sachs

 0.62 Correlation Coefficient DOW Goldman Sachs Inflation

### Poor diversification

The 3 months correlation between DOW and Goldman is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding DOW and Goldman Sachs Inflation in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Inflation and DOW 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 DOW 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 Inflation has no effect on the direction of DOW i.e., DOW and Goldman Sachs go up and down completely randomly.

## Pair Corralation between DOW and Goldman Sachs

Given the investment horizon of 90 days DOW is expected to generate 3.27 times more return on investment than Goldman Sachs. However, DOW is 3.27 times more volatile than Goldman Sachs Inflation. It trades about 0.08 of its potential returns per unit of risk. Goldman Sachs Inflation is currently generating about 0.08 per unit of risk. If you would invest  2,779,144  in DOW on September 2, 2021 and sell it today you would earn a total of  704,217  from holding DOW or generate 25.34% return on investment over 90 days.
 Time Period 3 Months [change] Direction Moves Together Strength Significant Accuracy 100.0% Values Daily Returns

## DOW  vs.  Goldman Sachs Inflation

 Performance (%)
 Timeline

## DOW and Goldman Sachs Volatility Contrast

 Predicted Return Density
 Returns

## DOW

### Pair trading matchups for DOW

 Sentinelone Inc vs. DOW Ford vs. DOW Microsoft Corp vs. DOW Salesforce vs. DOW Alphabet vs. DOW GM vs. DOW Du Pont vs. DOW Meta Platforms vs. DOW
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW.

## Pair Trading with DOW and Goldman Sachs

The main advantage of trading using opposite DOW and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DOW 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.

## DOW

### Pair trading matchups for DOW

 Sentinelone Inc vs. DOW Ford vs. DOW GM vs. DOW Du Pont vs. DOW Alphabet vs. DOW Meta Platforms vs. DOW Microsoft Corp vs. DOW Vmware vs. DOW
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW.
The idea behind DOW and Goldman Sachs Inflation 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 Inflation

### Pair trading matchups for Goldman Sachs

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

## Other Complementary Tools

 Portfolio ManagerState of the art Portfolio Manager to monitor and improve performance of your invested capital Go Fundamentals ComparisonCompare fundamentals across multiple equities to find investing opportunities Go Portfolio VolatilityCheck portfolio volatility and analyze historical return density to properly model market risk Go Balance Of PowerCheck stock momentum by analyzing Balance Of Power indicator and other technical ratios Go Equity SearchSearch for activelly traded equities including funds and ETFs from over 30 global markets Go Piotroski F ScoreGet Piotroski F Score based on binary analysis strategy of nine different fundamentals Go Sync Your BrokerSync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. Go Risk-Return AnalysisView associations between returns expected from investment and the risk you assume Go Performance AnalysisCheck effects of mean-variance optimization against your current asset allocation Go Price Exposure ProbabilityAnalyze equity upside and downside potential for a given time horizon across multiple markets Go Watchlist OptimizationOptimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm Go