Correlation Between Goldman Sachs and JPMorgan Diversified

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

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

Diversification Opportunities for Goldman Sachs and JPMorgan Diversified

0.97

Correlation Coefficient

Goldman Sachs  JPMorgan Diversified

Almost no diversification

The 3 months correlation between Goldman and JPMorgan is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs ActiveBeta and JPMorgan Diversified Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Diversified and Goldman Sachs 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 Goldman Sachs ActiveBeta are associated (or correlated) with JPMorgan Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Diversified has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and JPMorgan Diversified go up and down completely randomly.

Pair Corralation between Goldman Sachs and JPMorgan Diversified

Given the investment horizon of 90 days Goldman Sachs is expected to generate 4.29 times less return on investment than JPMorgan Diversified. But when comparing it to its historical volatility, Goldman Sachs ActiveBeta is 1.12 times less risky than JPMorgan Diversified. It trades about 0.01 of its potential returns per unit of risk. JPMorgan Diversified Return is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,575  in JPMorgan Diversified Return on February 4, 2024 and sell it today you would earn a total of  54.00  from holding JPMorgan Diversified Return or generate 0.97% return on investment over 90 days.

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

Goldman Sachs ActiveBeta  vs.  JPMorgan Diversified Return

Goldman Sachs ActiveBeta

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs ActiveBeta are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Goldman Sachs is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

JPMorgan Diversified

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Diversified Return are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, JPMorgan Diversified is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Goldman Sachs and JPMorgan Diversified

The main advantage of trading using opposite Goldman Sachs and JPMorgan Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goldman Sachs position performs unexpectedly, JPMorgan Diversified 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 JPMorgan Diversified will offset losses from the drop in JPMorgan Diversified's long position.

The idea behind Goldman Sachs ActiveBeta and JPMorgan Diversified Return 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.