Correlation Between Capital Group and Goldman Sachs

Can any of the company-specific risk be diversified away by investing in both Capital 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 Capital 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 Capital Group Core and Goldman Sachs Access, you can compare the effects of market volatilities on Capital 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 Capital Group with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Group and Goldman Sachs.

Diversification Opportunities for Capital Group and Goldman Sachs

0.72

Correlation Coefficient

Capital Group  Goldman Sachs

Poor diversification

The 3 months correlation between Capital and Goldman is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Capital Group Core and Goldman Sachs Access in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Access and Capital 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 Capital Group Core 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 Access has no effect on the direction of Capital Group i.e., Capital Group and Goldman Sachs go up and down completely randomly.

Pair Corralation between Capital Group and Goldman Sachs

Given the investment horizon of 90 days Capital Group Core is expected to generate 1.89 times more return on investment than Goldman Sachs. However, Capital Group is 1.89 times more volatile than Goldman Sachs Access. It trades about 0.13 of its potential returns per unit of risk. Goldman Sachs Access is currently generating about 0.09 per unit of risk. If you would invest  2,185  in Capital Group Core on September 26, 2024 and sell it today you would earn a total of  1,403  from holding Capital Group Core or generate 64.21% return on investment over 90 days.

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

Capital Group Core  vs.  Goldman Sachs Access

Capital Group Core

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group Core are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Capital Group is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Goldman Sachs Access

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Access has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat 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 Capital Group and Goldman Sachs

The main advantage of trading using opposite Capital Group and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital 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 Capital Group Core and Goldman Sachs Access 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..