Correlation Between Goldman Sachs and Morningstar

Can any of the company-specific risk be diversified away by investing in both Goldman Sachs and Morningstar 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 Morningstar 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 Morningstar Equity, you can compare the effects of market volatilities on Goldman Sachs and Morningstar 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 Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and Morningstar.

Diversification Opportunities for Goldman Sachs and Morningstar

0.3

Correlation Coefficient

Goldman Sachs  Morningstar

Weak diversification

The 3 months correlation between Goldman and Morningstar is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Real and Morningstar Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morningstar Equity 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 Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morningstar Equity has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Morningstar go up and down completely randomly.

Pair Corralation between Goldman Sachs and Morningstar

Assuming the 90 days horizon Goldman Sachs is expected to generate 1.86 times less return on investment than Morningstar. In addition to that, Goldman Sachs is 1.34 times more volatile than Morningstar Equity. It trades about 0.08 of its total potential returns per unit of risk. Morningstar Equity is currently generating about 0.2 per unit of volatility. If you would invest  1,356  in Morningstar Equity on September 5, 2024 and sell it today you would earn a total of  117.00  from holding Morningstar Equity or generate 8.63% return on investment over 90 days.

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

Goldman Sachs Real  vs.  Morningstar Equity

Goldman Sachs Real

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Real are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Goldman Sachs is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Morningstar Equity

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morningstar Equity are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Morningstar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Goldman Sachs and Morningstar

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

The idea behind Goldman Sachs Real and Morningstar Equity 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.