Correlation Between Goldman Sachs and Banking Fund

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

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

Diversification Opportunities for Goldman Sachs and Banking Fund

0.95

Correlation Coefficient

Goldman Sachs  Banking Fund

Almost no diversification

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

Pair Corralation between Goldman Sachs and Banking Fund

Assuming the 90 days horizon Goldman Sachs Growth is expected to generate 0.56 times more return on investment than Banking Fund. However, Goldman Sachs Growth is 1.78 times less risky than Banking Fund. It trades about 0.36 of its potential returns per unit of risk. Banking Fund Class is currently generating about 0.15 per unit of risk. If you would invest  1,910  in Goldman Sachs Growth on September 4, 2024 and sell it today you would earn a total of  469.00  from holding Goldman Sachs Growth or generate 24.55% 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 Growth  vs.  Banking Fund Class

Goldman Sachs Growth

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Growth are ranked lower than 28 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Goldman Sachs showed solid returns over the last few months and may actually be approaching a breakup point.

Banking Fund Class

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banking Fund Class are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Banking Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goldman Sachs and Banking Fund

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

The idea behind Goldman Sachs Growth and Banking Fund Class 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.