Correlation Between Goldman Sachs and Baron Growth

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

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

Diversification Opportunities for Goldman Sachs and Baron Growth

0.85

Correlation Coefficient

Goldman Sachs  Baron Growth

Very poor diversification

The 3 months correlation between Goldman and Baron is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Real and Baron Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron 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 Real are associated (or correlated) with Baron Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Growth has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Baron Growth go up and down completely randomly.

Pair Corralation between Goldman Sachs and Baron Growth

Assuming the 90 days horizon Goldman Sachs Real is expected to generate 0.59 times more return on investment than Baron Growth. However, Goldman Sachs Real is 1.68 times less risky than Baron Growth. It trades about -0.41 of its potential returns per unit of risk. Baron Growth Fund is currently generating about -0.27 per unit of risk. If you would invest  1,368  in Goldman Sachs Real on September 28, 2024 and sell it today you would lose (161.00) from holding Goldman Sachs Real or give up 11.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Goldman Sachs Real  vs.  Baron Growth Fund

Goldman Sachs Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Real has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest unfluctuating performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Baron Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baron Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Goldman Sachs and Baron Growth

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

The idea behind Goldman Sachs Real and Baron Growth Fund 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.