Correlation Between Columbia Small and Goldman Sachs

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

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

Diversification Opportunities for Columbia Small and Goldman Sachs

0.65

Correlation Coefficient

Columbia Small  Goldman Sachs

Poor diversification

The 3 months correlation between Columbia and Goldman is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Small Cap and Goldman Sachs Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Equity and Columbia Small 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 Columbia Small Cap 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 Equity has no effect on the direction of Columbia Small i.e., Columbia Small and Goldman Sachs go up and down completely randomly.

Pair Corralation between Columbia Small and Goldman Sachs

Assuming the 90 days horizon Columbia Small Cap is expected to generate 2.46 times more return on investment than Goldman Sachs. However, Columbia Small is 2.46 times more volatile than Goldman Sachs Equity. It trades about 0.21 of its potential returns per unit of risk. Goldman Sachs Equity is currently generating about 0.22 per unit of risk. If you would invest  5,092  in Columbia Small Cap on September 12, 2024 and sell it today you would earn a total of  700.00  from holding Columbia Small Cap or generate 13.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.71%
Values	Daily Returns

Columbia Small Cap  vs.  Goldman Sachs Equity

Columbia Small Cap

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Columbia Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Columbia Small showed solid returns over the last few months and may actually be approaching a breakup point.

Goldman Sachs Equity

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Equity are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Goldman Sachs may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Columbia Small and Goldman Sachs

The main advantage of trading using opposite Columbia Small and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Small 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 Columbia Small Cap and Goldman Sachs Equity 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.