Correlation Between B of A and Goldman Sachs

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Can any of the company-specific risk be diversified away by investing in both B of A 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 B of A and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Of America and Goldman Sachs Group, you can compare the effects of market volatilities on B of A 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 B of A with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of B of A and Goldman Sachs.

Diversification Opportunities for B of A and Goldman Sachs

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between B of A and Goldman is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Bank Of America 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 B of A 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 Bank Of America 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 B of A i.e., B of A and Goldman Sachs go up and down completely randomly.

Pair Corralation between B of A and Goldman Sachs

Considering the 90-day investment horizon Bank Of America is expected to generate 1.1 times more return on investment than Goldman Sachs. However, B of A is 1.1 times more volatile than Goldman Sachs Group. It trades about -0.24 of its potential returns per unit of risk. Goldman Sachs Group is currently generating about -0.36 per unit of risk. If you would invest  3,491  in Bank Of America on June 26, 2022 and sell it today you would lose (318.00)  from holding Bank Of America or give up 9.11% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Bank Of America  vs.  Goldman Sachs Group

 Performance (%) 
       Timeline  
Bank Of America 
B of A Performance
0 of 100
Over the last 90 days Bank Of America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, B of A is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

B of A Price Channel

Goldman Sachs Group 
Goldman Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Goldman Price Channel

B of A and Goldman Sachs Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with B of A and Goldman Sachs

The main advantage of trading using opposite B of A and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if B of A 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.
B of A vs. China Construction B
The idea behind Bank Of America 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.
Goldman Sachs vs. Industrias Bachoco SA
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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