Correlation Between Goldman Sachs and Macquarie Group

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

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

Diversification Opportunities for Goldman Sachs and Macquarie Group

0.24

Correlation Coefficient

Goldman Sachs  Macquarie Group

Modest diversification

The 3 months correlation between Goldman and Macquarie is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding The Goldman Sachs and Macquarie Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Group 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 The Goldman Sachs are associated (or correlated) with Macquarie Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Group has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Macquarie Group go up and down completely randomly.

Pair Corralation between Goldman Sachs and Macquarie Group

Assuming the 90 days trading horizon The Goldman Sachs is expected to generate 1.69 times more return on investment than Macquarie Group. However, Goldman Sachs is 1.69 times more volatile than Macquarie Group Limited. It trades about 0.15 of its potential returns per unit of risk. Macquarie Group Limited is currently generating about -0.05 per unit of risk. If you would invest  44,379  in The Goldman Sachs on September 23, 2024 and sell it today you would earn a total of  10,251  from holding The Goldman Sachs or generate 23.1% return on investment over 90 days.

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

The Goldman Sachs  vs.  Macquarie Group Limited

Goldman Sachs

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Goldman Sachs are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Macquarie Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Macquarie Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Macquarie Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Goldman Sachs and Macquarie Group

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

The idea behind The Goldman Sachs and Macquarie Group Limited 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.