Correlation Between Mid Cap and Goldman Sachs

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

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

Diversification Opportunities for Mid Cap and Goldman Sachs

0.43

Correlation Coefficient

Mid Cap  Goldman Sachs

Very weak diversification

The 3 months correlation between Mid and Goldman is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value and Goldman Sachs Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Government and Mid Cap 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 Mid Cap Value 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 Government has no effect on the direction of Mid Cap i.e., Mid Cap and Goldman Sachs go up and down completely randomly.

Pair Corralation between Mid Cap and Goldman Sachs

Assuming the 90 days horizon Mid Cap is expected to generate 1.59 times less return on investment than Goldman Sachs. In addition to that, Mid Cap is 2.48 times more volatile than Goldman Sachs Government. It trades about 0.03 of its total potential returns per unit of risk. Goldman Sachs Government is currently generating about 0.14 per unit of volatility. If you would invest  1,266  in Goldman Sachs Government on December 25, 2024 and sell it today you would earn a total of  32.00  from holding Goldman Sachs Government or generate 2.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Mid Cap Value  vs.  Goldman Sachs Government

Mid Cap Value

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Value are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mid Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs Government

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Government are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic 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 Mid Cap and Goldman Sachs

The main advantage of trading using opposite Mid Cap and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap 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 Mid Cap Value and Goldman Sachs Government 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 Stocks Directory module to find actively traded stocks across global markets.