Correlation Between Mountain I and Goldman Sachs

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

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

Diversification Opportunities for Mountain I and Goldman Sachs

0.62

Correlation Coefficient

Mountain I  Goldman Sachs

Poor diversification

The 3 months correlation between Mountain and Goldman is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Mountain I Acquisition 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 Mountain I 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 Mountain I Acquisition 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 Mountain I i.e., Mountain I and Goldman Sachs go up and down completely randomly.

Pair Corralation between Mountain I and Goldman Sachs

Given the investment horizon of 90 days Mountain I is expected to generate 3.58 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Mountain I Acquisition is 9.62 times less risky than Goldman Sachs. It trades about 0.18 of its potential returns per unit of risk. Goldman Sachs Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  35,183  in Goldman Sachs Group on August 4, 2024 and sell it today you would earn a total of  16,752  from holding Goldman Sachs Group or generate 47.61% return on investment over 90 days.

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

Mountain I Acquisition  vs.  Goldman Sachs Group

Mountain I Acquisition

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mountain I Acquisition are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mountain I is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 abnormal basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mountain I and Goldman Sachs

The main advantage of trading using opposite Mountain I and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mountain I 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 Mountain I Acquisition 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.