Correlation Between Goldman Sachs and Large Cap

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

By analyzing existing cross correlation between Goldman Sachs Dynamic and Large Cap Growth Profund, you can compare the effects of market volatilities on Goldman Sachs and Large Cap 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 Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and Large Cap.

Diversification Opportunities for Goldman Sachs and Large Cap

0.95

Correlation Coefficient

Goldman Sachs  Large Cap

Almost no diversification

The 3 months correlation between Goldman and Large is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Dynamic and Large Cap Growth Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Growth 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 Dynamic are associated (or correlated) with Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Growth has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Large Cap go up and down completely randomly.

Pair Corralation between Goldman Sachs and Large Cap

Assuming the 90 days horizon Goldman Sachs is expected to generate 1.19 times less return on investment than Large Cap. But when comparing it to its historical volatility, Goldman Sachs Dynamic is 1.29 times less risky than Large Cap. It trades about 0.19 of its potential returns per unit of risk. Large Cap Growth Profund is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  4,199  in Large Cap Growth Profund on September 13, 2024 and sell it today you would earn a total of  425.00  from holding Large Cap Growth Profund or generate 10.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Goldman Sachs Dynamic  vs.  Large Cap Growth Profund

Goldman Sachs Dynamic

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Dynamic are ranked lower than 14 (%) 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.

Large Cap Growth

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap Growth Profund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Large Cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Goldman Sachs and Large Cap

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

The idea behind Goldman Sachs Dynamic and Large Cap Growth Profund 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.