Correlation Between Goldman Sachs and Small Capitalization

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

Diversification Opportunities for Goldman Sachs and Small Capitalization

-0.68

Correlation Coefficient

Goldman Sachs  Small Capitalization

Excellent diversification

The 3 months correlation between Goldman and Small is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Clean and Small Capitalization Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Capitalization 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 Small Capitalization. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Capitalization has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Small Capitalization go up and down completely randomly.

Pair Corralation between Goldman Sachs and Small Capitalization

Assuming the 90 days horizon Goldman Sachs Clean is expected to generate 0.52 times more return on investment than Small Capitalization. However, Goldman Sachs Clean is 1.94 times less risky than Small Capitalization. It trades about 0.05 of its potential returns per unit of risk. Small Capitalization Portfolio is currently generating about -0.09 per unit of risk. If you would invest  822.00  in Goldman Sachs Clean on December 26, 2024 and sell it today you would earn a total of  22.00  from holding Goldman Sachs Clean or generate 2.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Goldman Sachs Clean  vs.  Small Capitalization Portfolio

Goldman Sachs Clean

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Clean are ranked lower than 3 (%) 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.

Small Capitalization

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Capitalization Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental 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 Small Capitalization

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

The idea behind Goldman Sachs Clean and Small Capitalization Portfolio 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.