Correlation Between Goldman Sachs and Select Equity

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

Diversification Opportunities for Goldman Sachs and Select Equity

-0.67

Correlation Coefficient

Goldman Sachs  Select Equity

Excellent diversification

The 3 months correlation between Goldman and Select is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Clean and Select Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Equity 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 Select Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Equity has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Select Equity go up and down completely randomly.

Pair Corralation between Goldman Sachs and Select Equity

Assuming the 90 days horizon Goldman Sachs Clean is expected to generate 0.92 times more return on investment than Select Equity. However, Goldman Sachs Clean is 1.08 times less risky than Select Equity. It trades about 0.08 of its potential returns per unit of risk. Select Equity Fund is currently generating about -0.09 per unit of risk. If you would invest  816.00  in Goldman Sachs Clean on December 29, 2024 and sell it today you would earn a total of  39.00  from holding Goldman Sachs Clean or generate 4.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Goldman Sachs Clean  vs.  Select Equity Fund

Goldman Sachs Clean

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Clean are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Select Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Select Equity Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Select Equity 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 Select Equity

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

The idea behind Goldman Sachs Clean and Select Equity 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.