Correlation Between Goldman Sachs and Deutsche Gold

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

Diversification Opportunities for Goldman Sachs and Deutsche Gold

0.83

Correlation Coefficient

Goldman Sachs  Deutsche Gold

Very poor diversification

The 3 months correlation between Goldman and Deutsche is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Clean and Deutsche Gold Precious in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Gold Precious 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 Deutsche Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Gold Precious has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Deutsche Gold go up and down completely randomly.

Pair Corralation between Goldman Sachs and Deutsche Gold

Assuming the 90 days horizon Goldman Sachs Clean is expected to under-perform the Deutsche Gold. But the mutual fund apears to be less risky and, when comparing its historical volatility, Goldman Sachs Clean is 1.41 times less risky than Deutsche Gold. The mutual fund trades about -0.19 of its potential returns per unit of risk. The Deutsche Gold Precious is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  6,333  in Deutsche Gold Precious on October 22, 2024 and sell it today you would lose (795.00) from holding Deutsche Gold Precious or give up 12.55% of portfolio value over 90 days.

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

Goldman Sachs Clean  vs.  Deutsche Gold Precious

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 February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Deutsche Gold Precious

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Gold Precious 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 forward 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 Deutsche Gold

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

The idea behind Goldman Sachs Clean and Deutsche Gold Precious 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.