Correlation Between M Large and Goldman Sachs

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

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

Diversification Opportunities for M Large and Goldman Sachs

0.81

Correlation Coefficient

M Large  Goldman Sachs

Very poor diversification

The 3 months correlation between MTCGX and Goldman is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding M Large Cap and Goldman Sachs Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Large and M Large 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 M Large Cap 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 Large has no effect on the direction of M Large i.e., M Large and Goldman Sachs go up and down completely randomly.

Pair Corralation between M Large and Goldman Sachs

Assuming the 90 days horizon M Large Cap is expected to generate 0.64 times more return on investment than Goldman Sachs. However, M Large Cap is 1.56 times less risky than Goldman Sachs. It trades about 0.14 of its potential returns per unit of risk. Goldman Sachs Large is currently generating about 0.02 per unit of risk. If you would invest  3,450  in M Large Cap on September 18, 2024 and sell it today you would earn a total of  319.00  from holding M Large Cap or generate 9.25% return on investment over 90 days.

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

M Large Cap  vs.  Goldman Sachs Large

M Large Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in M Large Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, M Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Goldman Sachs Large

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Large are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with M Large and Goldman Sachs

The main advantage of trading using opposite M Large and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M Large 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 M Large Cap and Goldman Sachs Large 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 Commodity Directory module to find actively traded commodities issued by global exchanges.