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 SP, 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

0.97

Correlation Coefficient

Capital Group  Goldman Sachs

Almost no diversification

The 3 months correlation between Capital and Goldman is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Capital Group Core and Goldman Sachs SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs SP 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 SP 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 under-perform the Goldman Sachs. In addition to that, Capital Group is 1.16 times more volatile than Goldman Sachs SP. It trades about -0.1 of its total potential returns per unit of risk. Goldman Sachs SP is currently generating about -0.11 per unit of volatility. If you would invest  5,038  in Goldman Sachs SP on October 4, 2024 and sell it today you would lose (93.00) from holding Goldman Sachs SP or give up 1.85% of portfolio value over 90 days.

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

Capital Group Core  vs.  Goldman Sachs SP

Capital Group Core

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group Core are ranked lower than 3 (%) 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 SP

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs SP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, Goldman Sachs is not utilizing all of its potentials. The newest 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 SP 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.

Check out your portfolio center.

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..