Correlation Between Goldman Sachs and State Street

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

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

Diversification Opportunities for Goldman Sachs and State Street

0.51

Correlation Coefficient

Goldman Sachs  State Street

Very weak diversification

The 3 months correlation between Goldman and State is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Inflation and State Street Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Target 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 Inflation are associated (or correlated) with State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Target has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and State Street go up and down completely randomly.

Pair Corralation between Goldman Sachs and State Street

Assuming the 90 days horizon Goldman Sachs Inflation is expected to under-perform the State Street. In addition to that, Goldman Sachs is 1.03 times more volatile than State Street Target. It trades about -0.14 of its total potential returns per unit of risk. State Street Target is currently generating about 0.02 per unit of volatility. If you would invest  1,156  in State Street Target on September 17, 2024 and sell it today you would earn a total of  3.00  from holding State Street Target or generate 0.26% return on investment over 90 days.

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

Goldman Sachs Inflation  vs.  State Street Target

Goldman Sachs Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Inflation 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.

State Street Target

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Target are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, State Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Goldman Sachs and State Street

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

The idea behind Goldman Sachs Inflation and State Street Target 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.