Correlation Between JPMorgan Diversified and Goldman Sachs

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

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

Diversification Opportunities for JPMorgan Diversified and Goldman Sachs

0.99

Correlation Coefficient

JPMorgan Diversified  Goldman Sachs

No risk reduction

The 3 months correlation between JPMorgan and Goldman is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Diversified Return and Goldman Sachs ActiveBeta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs ActiveBeta and JPMorgan Diversified 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 JPMorgan Diversified Return 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 ActiveBeta has no effect on the direction of JPMorgan Diversified i.e., JPMorgan Diversified and Goldman Sachs go up and down completely randomly.

Pair Corralation between JPMorgan Diversified and Goldman Sachs

Given the investment horizon of 90 days JPMorgan Diversified Return is expected to generate 1.01 times more return on investment than Goldman Sachs. However, JPMorgan Diversified is 1.01 times more volatile than Goldman Sachs ActiveBeta. It trades about -0.11 of its potential returns per unit of risk. Goldman Sachs ActiveBeta is currently generating about -0.14 per unit of risk. If you would invest  5,611  in JPMorgan Diversified Return on January 26, 2024 and sell it today you would lose (101.00) from holding JPMorgan Diversified Return or give up 1.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

JPMorgan Diversified Return  vs.  Goldman Sachs ActiveBeta

JPMorgan Diversified

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Diversified Return are ranked lower than 5 (%) 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 latest stock price disarray, may contribute to short-term losses for the investors.

Goldman Sachs ActiveBeta

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs ActiveBeta are ranked lower than 5 (%) 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.

Pair Trading with JPMorgan Diversified and Goldman Sachs

The main advantage of trading using opposite JPMorgan Diversified and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan Diversified 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 JPMorgan Diversified Return and Goldman Sachs ActiveBeta 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.