Correlation Between Goldman Sachs and Prudential Commodity

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

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

Diversification Opportunities for Goldman Sachs and Prudential Commodity

0.79

Correlation Coefficient

Goldman Sachs  Prudential Commodity

Poor diversification

The 3 months correlation between Goldman and Prudential is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Clean and Prudential Commodity Strategie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Commodity 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 Clean are associated (or correlated) with Prudential Commodity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Commodity has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Prudential Commodity go up and down completely randomly.

Pair Corralation between Goldman Sachs and Prudential Commodity

Assuming the 90 days horizon Goldman Sachs Clean is expected to under-perform the Prudential Commodity. But the mutual fund apears to be less risky and, when comparing its historical volatility, Goldman Sachs Clean is 1.23 times less risky than Prudential Commodity. The mutual fund trades about -0.44 of its potential returns per unit of risk. The Prudential Commodity Strategies is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  683.00  in Prudential Commodity Strategies on September 29, 2024 and sell it today you would lose (27.00) from holding Prudential Commodity Strategies or give up 3.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Goldman Sachs Clean  vs.  Prudential Commodity Strategie

Goldman Sachs Clean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Clean 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 fundamental drivers remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Prudential Commodity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Commodity Strategies has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Prudential Commodity 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 Prudential Commodity

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

The idea behind Goldman Sachs Clean and Prudential Commodity Strategies 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.