Correlation Between Capital One and Goldman Sachs

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

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

Diversification Opportunities for Capital One and Goldman Sachs

0.95

Correlation Coefficient

Capital One  Goldman Sachs

Almost no diversification

The 3 months correlation between Capital and Goldman is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and The Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs and Capital One 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 Capital One Financial 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 Capital One i.e., Capital One and Goldman Sachs go up and down completely randomly.

Pair Corralation between Capital One and Goldman Sachs

Assuming the 90 days trading horizon Capital One Financial is expected to generate 0.74 times more return on investment than Goldman Sachs. However, Capital One Financial is 1.35 times less risky than Goldman Sachs. It trades about 0.15 of its potential returns per unit of risk. The Goldman Sachs is currently generating about 0.03 per unit of risk. If you would invest  53,904  in Capital One Financial on September 22, 2024 and sell it today you would earn a total of  2,868  from holding Capital One Financial or generate 5.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

Capital One Financial  vs.  The Goldman Sachs

Capital One Financial

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Capital One sustained solid returns over the last few months and may actually be approaching a breakup point.

Goldman Sachs

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Goldman Sachs are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Goldman Sachs sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capital One and Goldman Sachs

The main advantage of trading using opposite Capital One and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One 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 Capital One Financial 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.