Correlation Between Global Equity and Goldman Sachs

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

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

Diversification Opportunities for Global Equity and Goldman Sachs

0.58

Correlation Coefficient

Global Equity  Goldman Sachs

Very weak diversification

The 3 months correlation between Global and GOLDMAN is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Global Equity Fund and Goldman Sachs Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Growth and Global Equity 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 Global Equity Fund are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Growth has no effect on the direction of Global Equity i.e., Global Equity and Goldman Sachs go up and down completely randomly.

Pair Corralation between Global Equity and Goldman Sachs

Assuming the 90 days horizon Global Equity is expected to generate 7.96 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Global Equity Fund is 1.72 times less risky than Goldman Sachs. It trades about 0.08 of its potential returns per unit of risk. Goldman Sachs Growth is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  1,903  in Goldman Sachs Growth on September 5, 2024 and sell it today you would earn a total of  488.00  from holding Goldman Sachs Growth or generate 25.64% return on investment over 90 days.

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

Global Equity Fund  vs.  Goldman Sachs Growth

Global Equity

Risk-Adjusted Performance

6 of 100

Modest

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

Goldman Sachs Growth

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Growth are ranked lower than 29 (%) 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.

Pair Trading with Global Equity and Goldman Sachs

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

The idea behind Global Equity Fund and Goldman Sachs Growth 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.