Correlation Between Goldman Sachs and Technology Ultrasector

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

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

Diversification Opportunities for Goldman Sachs and Technology Ultrasector

0.73

Correlation Coefficient

Goldman Sachs  Technology Ultrasector

Poor diversification

The 3 months correlation between Goldman and Technology is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Absolute and Technology Ultrasector Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology Ultrasector 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 Absolute are associated (or correlated) with Technology Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Ultrasector has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Technology Ultrasector go up and down completely randomly.

Pair Corralation between Goldman Sachs and Technology Ultrasector

Assuming the 90 days horizon Goldman Sachs Absolute is expected to generate 0.13 times more return on investment than Technology Ultrasector. However, Goldman Sachs Absolute is 7.77 times less risky than Technology Ultrasector. It trades about -0.19 of its potential returns per unit of risk. Technology Ultrasector Profund is currently generating about -0.16 per unit of risk. If you would invest  865.00  in Goldman Sachs Absolute on October 11, 2024 and sell it today you would lose (13.00) from holding Goldman Sachs Absolute or give up 1.5% of portfolio value over 90 days.

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

Goldman Sachs Absolute  vs.  Technology Ultrasector Profund

Goldman Sachs Absolute

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Absolute 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.

Technology Ultrasector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Technology Ultrasector Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward 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 Technology Ultrasector

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

The idea behind Goldman Sachs Absolute and Technology Ultrasector Profund 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.