Correlation Between Macquarie Group and Goldman Sachs

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

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

Diversification Opportunities for Macquarie Group and Goldman Sachs

0.25

Correlation Coefficient

Macquarie Group  Goldman Sachs

Modest diversification

The 3 months correlation between Macquarie and Goldman is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group Limited and The Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs and Macquarie Group 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 Macquarie Group Limited 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 has no effect on the direction of Macquarie Group i.e., Macquarie Group and Goldman Sachs go up and down completely randomly.

Pair Corralation between Macquarie Group and Goldman Sachs

Assuming the 90 days horizon Macquarie Group Limited is expected to under-perform the Goldman Sachs. In addition to that, Macquarie Group is 1.23 times more volatile than The Goldman Sachs. It trades about -0.34 of its total potential returns per unit of risk. The Goldman Sachs is currently generating about -0.22 per unit of volatility. If you would invest  57,241  in The Goldman Sachs on September 24, 2024 and sell it today you would lose (2,451) from holding The Goldman Sachs or give up 4.28% of portfolio value over 90 days.

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

Macquarie Group Limited  vs.  The Goldman Sachs

Macquarie Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Macquarie Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Macquarie Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Goldman Sachs

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Goldman Sachs are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Goldman Sachs reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Macquarie Group and Goldman Sachs

The main advantage of trading using opposite Macquarie Group and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macquarie Group 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 Macquarie Group Limited and The Goldman Sachs 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.