Correlation Between Goldman Sachs and Alger Capital

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

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

Diversification Opportunities for Goldman Sachs and Alger Capital

0.01

Correlation Coefficient

Goldman Sachs  Alger Capital

Significant diversification

The 3 months correlation between Goldman and Alger is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Emerging and Alger Capital Appreciation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Capital Apprec 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 Emerging are associated (or correlated) with Alger Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Capital Apprec has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Alger Capital go up and down completely randomly.

Pair Corralation between Goldman Sachs and Alger Capital

Assuming the 90 days horizon Goldman Sachs is expected to generate 38.9 times less return on investment than Alger Capital. But when comparing it to its historical volatility, Goldman Sachs Emerging is 1.2 times less risky than Alger Capital. It trades about 0.01 of its potential returns per unit of risk. Alger Capital Appreciation is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  3,123  in Alger Capital Appreciation on September 4, 2024 and sell it today you would earn a total of  690.00  from holding Alger Capital Appreciation or generate 22.09% return on investment over 90 days.

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

Goldman Sachs Emerging  vs.  Alger Capital Appreciation

Goldman Sachs Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Emerging has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alger Capital Apprec

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Capital Appreciation are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Alger Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goldman Sachs and Alger Capital

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

The idea behind Goldman Sachs Emerging and Alger Capital Appreciation 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.