Correlation Between Banking Fund and Goldman Sachs

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

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

Diversification Opportunities for Banking Fund and Goldman Sachs

0.95

Correlation Coefficient

Banking Fund  Goldman Sachs

Almost no diversification

The 3 months correlation between Banking and Goldman is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Banking Fund Class 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 Banking Fund 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 Banking Fund Class 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 Banking Fund i.e., Banking Fund and Goldman Sachs go up and down completely randomly.

Pair Corralation between Banking Fund and Goldman Sachs

Assuming the 90 days horizon Banking Fund is expected to generate 1.16 times less return on investment than Goldman Sachs. In addition to that, Banking Fund is 1.69 times more volatile than Goldman Sachs Growth. It trades about 0.16 of its total potential returns per unit of risk. Goldman Sachs Growth is currently generating about 0.32 per unit of volatility. If you would invest  1,955  in Goldman Sachs Growth on September 12, 2024 and sell it today you would earn a total of  429.00  from holding Goldman Sachs Growth or generate 21.94% return on investment over 90 days.

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

Banking Fund Class  vs.  Goldman Sachs Growth

Banking Fund Class

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banking Fund Class are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Banking Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Goldman Sachs Growth

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Growth are ranked lower than 24 (%) 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 Banking Fund and Goldman Sachs

The main advantage of trading using opposite Banking Fund and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banking Fund 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 Banking Fund Class 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..