Correlation Between T Rowe and Goldman Sachs

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

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

Diversification Opportunities for T Rowe and Goldman Sachs

0.4

Correlation Coefficient

T Rowe  Goldman Sachs

Very weak diversification

The 3 months correlation between TRBCX and Goldman is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Goldman Sachs Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Small and T Rowe 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 T Rowe Price 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 Small has no effect on the direction of T Rowe i.e., T Rowe and Goldman Sachs go up and down completely randomly.

Pair Corralation between T Rowe and Goldman Sachs

Assuming the 90 days horizon T Rowe Price is expected to generate 0.72 times more return on investment than Goldman Sachs. However, T Rowe Price is 1.38 times less risky than Goldman Sachs. It trades about 0.12 of its potential returns per unit of risk. Goldman Sachs Small is currently generating about 0.01 per unit of risk. If you would invest  13,748  in T Rowe Price on September 20, 2024 and sell it today you would earn a total of  4,976  from holding T Rowe Price or generate 36.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

T Rowe Price  vs.  Goldman Sachs Small

T Rowe Price

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, T Rowe may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Goldman Sachs Small

Risk-Adjusted Performance

0 of 100

Very Weak

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.

Pair Trading with T Rowe and Goldman Sachs

The main advantage of trading using opposite T Rowe and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe 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 T Rowe Price and Goldman Sachs Small 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.