Correlation Between Goldman Sachs and Inverse Mid

Can any of the company-specific risk be diversified away by investing in both Goldman Sachs and Inverse Mid 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 Inverse Mid 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 Inverse Mid Cap Strategy, you can compare the effects of market volatilities on Goldman Sachs and Inverse Mid 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 Inverse Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and Inverse Mid.

Diversification Opportunities for Goldman Sachs and Inverse Mid

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Correlation Coefficient

Goldman Sachs  Inverse Mid

Pay attention - limited upside

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

Pair Corralation between Goldman Sachs and Inverse Mid

Assuming the 90 days horizon Goldman Sachs Financial is expected to generate 0.06 times more return on investment than Inverse Mid. However, Goldman Sachs Financial is 15.5 times less risky than Inverse Mid. It trades about 0.08 of its potential returns per unit of risk. Inverse Mid Cap Strategy is currently generating about -0.03 per unit of risk. If you would invest  97.00  in Goldman Sachs Financial on October 8, 2024 and sell it today you would earn a total of  3.00  from holding Goldman Sachs Financial or generate 3.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.47%
Values	Daily Returns

Goldman Sachs Financial  vs.  Inverse Mid Cap Strategy

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.

Inverse Mid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inverse Mid Cap Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's essential indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Goldman Sachs and Inverse Mid

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

The idea behind Goldman Sachs Financial and Inverse Mid Cap Strategy 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.