Correlation Between Goldman Sachs and Large Cap

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

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

Diversification Opportunities for Goldman Sachs and Large Cap

0.8

Correlation Coefficient

Goldman Sachs  Large Cap

Very poor diversification

The 3 months correlation between Goldman and Large is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Global and Large Cap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap 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 Global are associated (or correlated) with Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Fund has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Large Cap go up and down completely randomly.

Pair Corralation between Goldman Sachs and Large Cap

Assuming the 90 days horizon Goldman Sachs Global is expected to generate 0.2 times more return on investment than Large Cap. However, Goldman Sachs Global is 4.95 times less risky than Large Cap. It trades about 0.05 of its potential returns per unit of risk. Large Cap Fund is currently generating about 0.01 per unit of risk. If you would invest  1,086  in Goldman Sachs Global on October 5, 2024 and sell it today you would earn a total of  41.00  from holding Goldman Sachs Global or generate 3.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.63%
Values	Daily Returns

Goldman Sachs Global  vs.  Large Cap Fund

Goldman Sachs Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Global 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.

Large Cap Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Large Cap Fund 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 basic 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 Large Cap

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

The idea behind Goldman Sachs Global and Large Cap 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.