Correlation Between IMGP DBi and Goldman Sachs

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

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

Diversification Opportunities for IMGP DBi and Goldman Sachs

0.95

Correlation Coefficient

IMGP DBi  Goldman Sachs

Almost no diversification

The 3 months correlation between IMGP and Goldman is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iMGP DBi Managed and Goldman Sachs Physical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Physical and IMGP DBi 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 iMGP DBi Managed 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 Physical has no effect on the direction of IMGP DBi i.e., IMGP DBi and Goldman Sachs go up and down completely randomly.

Pair Corralation between IMGP DBi and Goldman Sachs

Given the investment horizon of 90 days IMGP DBi is expected to generate 1.55 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, iMGP DBi Managed is 1.17 times less risky than Goldman Sachs. It trades about 0.21 of its potential returns per unit of risk. Goldman Sachs Physical is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  2,150  in Goldman Sachs Physical on January 25, 2024 and sell it today you would earn a total of  146.00  from holding Goldman Sachs Physical or generate 6.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

iMGP DBi Managed  vs.  Goldman Sachs Physical

iMGP DBi Managed

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iMGP DBi Managed are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating primary indicators, IMGP DBi may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Goldman Sachs Physical

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Physical are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IMGP DBi and Goldman Sachs

The main advantage of trading using opposite IMGP DBi and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMGP DBi 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 iMGP DBi Managed and Goldman Sachs Physical 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.