Correlation Between Goldman Sachs and Bank of New York

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

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

Diversification Opportunities for Goldman Sachs and Bank of New York

0.83

Correlation Coefficient

Goldman Sachs  Bank of New York

Very poor diversification

The 3 months correlation between Goldman and Bank is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Group and Bank of New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of New York 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 Group are associated (or correlated) with Bank of New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of New York has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Bank of New York go up and down completely randomly.

Pair Corralation between Goldman Sachs and Bank of New York

Allowing for the 90-day total investment horizon Goldman Sachs Group is expected to generate 1.34 times more return on investment than Bank of New York. However, Goldman Sachs is 1.34 times more volatile than Bank of New. It trades about 0.14 of its potential returns per unit of risk. Bank of New is currently generating about 0.06 per unit of risk. If you would invest  41,351  in Goldman Sachs Group on January 31, 2024 and sell it today you would earn a total of  1,730  from holding Goldman Sachs Group or generate 4.18% return on investment over 90 days.

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

Goldman Sachs Group  vs.  Bank of New

Goldman Sachs Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bank of New York

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of New are ranked lower than 5 (%) 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 current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Goldman Sachs and Bank of New York

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

The idea behind Goldman Sachs Group and Bank of New 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.