Correlation Between Goldman Sachs and The Value

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

By analyzing existing cross correlation between Goldman Sachs Equity and The Value Fund, you can compare the effects of market volatilities on Goldman Sachs and The Value 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 The Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and The Value.

Diversification Opportunities for Goldman Sachs and The Value

0.9

Correlation Coefficient

Goldman Sachs  The Value

Almost no diversification

The 3 months correlation between Goldman and The is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Equity and The Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund 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 Equity are associated (or correlated) with The Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and The Value go up and down completely randomly.

Pair Corralation between Goldman Sachs and The Value

Assuming the 90 days horizon Goldman Sachs Equity is expected to generate 1.05 times more return on investment than The Value. However, Goldman Sachs is 1.05 times more volatile than The Value Fund. It trades about -0.08 of its potential returns per unit of risk. The Value Fund is currently generating about -0.14 per unit of risk. If you would invest  2,370  in Goldman Sachs Equity on November 29, 2024 and sell it today you would lose (123.00) from holding Goldman Sachs Equity or give up 5.19% of portfolio value over 90 days.

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

Goldman Sachs Equity  vs.  The Value Fund

Goldman Sachs Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goldman Sachs Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Value Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Goldman Sachs and The Value

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

The idea behind Goldman Sachs Equity and The Value Fund 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.