Correlation Between Goldman Sachs and Invesco DWA

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

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

Diversification Opportunities for Goldman Sachs and Invesco DWA

-0.54

Correlation Coefficient

Goldman Sachs  Invesco DWA

Excellent diversification

The 3 months correlation between Goldman and Invesco is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Future and Invesco DWA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Financial 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 Future are associated (or correlated) with Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Financial has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Invesco DWA go up and down completely randomly.

Pair Corralation between Goldman Sachs and Invesco DWA

Given the investment horizon of 90 days Goldman Sachs Future is expected to under-perform the Invesco DWA. But the etf apears to be less risky and, when comparing its historical volatility, Goldman Sachs Future is 2.71 times less risky than Invesco DWA. The etf trades about -0.14 of its potential returns per unit of risk. The Invesco DWA Financial is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5,719  in Invesco DWA Financial on August 23, 2024 and sell it today you would earn a total of  392.00  from holding Invesco DWA Financial or generate 6.85% return on investment over 90 days.

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

Goldman Sachs Future  vs.  Invesco DWA Financial

Goldman Sachs Future

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Future has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Goldman Sachs is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Invesco DWA Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical and fundamental indicators, Invesco DWA demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goldman Sachs and Invesco DWA

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

The idea behind Goldman Sachs Future and Invesco DWA Financial 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.