Correlation Between Goldman Sachs and Total Return

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

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

Diversification Opportunities for Goldman Sachs and Total Return

-0.28

Correlation Coefficient

Goldman Sachs  Total Return

Very good diversification

The 3 months correlation between Goldman and Total is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Small and Total Return Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Return Bond 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 Small are associated (or correlated) with Total Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Return Bond has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Total Return go up and down completely randomly.

Pair Corralation between Goldman Sachs and Total Return

Assuming the 90 days horizon Goldman Sachs Small is expected to under-perform the Total Return. In addition to that, Goldman Sachs is 6.81 times more volatile than Total Return Bond. It trades about -0.05 of its total potential returns per unit of risk. Total Return Bond is currently generating about -0.17 per unit of volatility. If you would invest  1,137  in Total Return Bond on September 16, 2024 and sell it today you would lose (38.00) from holding Total Return Bond or give up 3.34% of portfolio value over 90 days.

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

Goldman Sachs Small  vs.  Total Return Bond

Goldman Sachs Small

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Goldman Sachs Small 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.

Total Return Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Total Return Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Total Return 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 Total Return

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

The idea behind Goldman Sachs Small and Total Return Bond 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.