Correlation Between Amcap Fund and Goldman Sachs

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

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

Diversification Opportunities for Amcap Fund and Goldman Sachs

-0.04

Correlation Coefficient

Amcap Fund  Goldman Sachs

Good diversification

The 3 months correlation between Amcap and Goldman is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Amcap Fund Class 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 Amcap Fund 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 Amcap Fund Class 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 Amcap Fund i.e., Amcap Fund and Goldman Sachs go up and down completely randomly.

Pair Corralation between Amcap Fund and Goldman Sachs

Assuming the 90 days horizon Amcap Fund Class is expected to generate 2.26 times more return on investment than Goldman Sachs. However, Amcap Fund is 2.26 times more volatile than Goldman Sachs Government. It trades about 0.09 of its potential returns per unit of risk. Goldman Sachs Government is currently generating about 0.02 per unit of risk. If you would invest  2,984  in Amcap Fund Class on September 26, 2024 and sell it today you would earn a total of  1,444  from holding Amcap Fund Class or generate 48.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Amcap Fund Class  vs.  Goldman Sachs Government

Amcap Fund Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amcap Fund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Amcap Fund 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

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Government has generated negative risk-adjusted returns adding no value to fund investors. 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 Amcap Fund and Goldman Sachs

The main advantage of trading using opposite Amcap Fund and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amcap Fund 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 Amcap Fund Class 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.