Correlation Between Bank of New York and Goldman Sachs

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

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

Diversification Opportunities for Bank of New York and Goldman Sachs

0.79

Correlation Coefficient

Bank of New York  Goldman Sachs

Poor diversification

The 3 months correlation between Bank and Goldman is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Bank of New and Goldman Sachs Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Group and Bank of New York 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 Bank of New 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 Group has no effect on the direction of Bank of New York i.e., Bank of New York and Goldman Sachs go up and down completely randomly.

Pair Corralation between Bank of New York and Goldman Sachs

Allowing for the 90-day total investment horizon Bank of New York is expected to generate 1.77 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Bank of New is 1.31 times less risky than Goldman Sachs. It trades about 0.1 of its potential returns per unit of risk. Goldman Sachs Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  40,494  in Goldman Sachs Group on January 25, 2024 and sell it today you would earn a total of  1,810  from holding Goldman Sachs Group or generate 4.47% return on investment over 90 days.

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

Bank of New  vs.  Goldman Sachs Group

Bank of New York

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of New are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Bank of New York is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Goldman Sachs Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Goldman Sachs may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Bank of New York and Goldman Sachs

The main advantage of trading using opposite Bank of New York and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of New York 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 Bank of New and Goldman Sachs Group 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.