Correlation Between Embassy Bancorp and Goldman Sachs

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

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

Diversification Opportunities for Embassy Bancorp and Goldman Sachs

-0.61

Correlation Coefficient

Embassy Bancorp  Goldman Sachs

Excellent diversification

The 3 months correlation between Embassy and Goldman is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Embassy Bancorp 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 Embassy Bancorp 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 Embassy Bancorp 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 Embassy Bancorp i.e., Embassy Bancorp and Goldman Sachs go up and down completely randomly.

Pair Corralation between Embassy Bancorp and Goldman Sachs

Given the investment horizon of 90 days Embassy Bancorp is expected to under-perform the Goldman Sachs. But the otc stock apears to be less risky and, when comparing its historical volatility, Embassy Bancorp is 1.15 times less risky than Goldman Sachs. The otc stock trades about -0.08 of its potential returns per unit of risk. The Goldman Sachs Group is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  44,113  in Goldman Sachs Group on March 8, 2024 and sell it today you would earn a total of  2,055  from holding Goldman Sachs Group or generate 4.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Embassy Bancorp  vs.  Goldman Sachs Group

Embassy Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embassy Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Embassy Bancorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs Group

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Group are ranked lower than 17 (%) 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 Embassy Bancorp and Goldman Sachs

The main advantage of trading using opposite Embassy Bancorp and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embassy Bancorp 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 Embassy Bancorp 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.