Correlation Between Goldman Sachs and Small Cap

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

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

Diversification Opportunities for Goldman Sachs and Small Cap

0.0

Correlation Coefficient

Goldman Sachs  Small Cap

Pay attention - limited upside

The 3 months correlation between Goldman and Small is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Financial and Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Growth and Goldman Sachs 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 Goldman Sachs Financial are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Growth has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Small Cap go up and down completely randomly.

Pair Corralation between Goldman Sachs and Small Cap

Assuming the 90 days horizon Goldman Sachs Financial is expected to generate 13.99 times more return on investment than Small Cap. However, Goldman Sachs is 13.99 times more volatile than Small Cap Growth. It trades about 0.02 of its potential returns per unit of risk. Small Cap Growth is currently generating about 0.05 per unit of risk. If you would invest  408.00  in Goldman Sachs Financial on October 10, 2024 and sell it today you would lose (308.00) from holding Goldman Sachs Financial or give up 75.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.21%
Values	Daily Returns

Goldman Sachs Financial  vs.  Small Cap Growth

Goldman Sachs Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Financial 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.

Small Cap Growth

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Growth are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Small Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Goldman Sachs and Small Cap

The main advantage of trading using opposite Goldman Sachs and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goldman Sachs position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.

The idea behind Goldman Sachs Financial and Small Cap Growth 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.