Correlation Between Goldman Sachs and Commonwealth Global

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

By analyzing existing cross correlation between Goldman Sachs Tax Managed and Commonwealth Global Fund, you can compare the effects of market volatilities on Goldman Sachs and Commonwealth Global 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 Commonwealth Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and Commonwealth Global.

Diversification Opportunities for Goldman Sachs and Commonwealth Global

0.7

Correlation Coefficient

Goldman Sachs  Commonwealth Global

Poor diversification

The 3 months correlation between Goldman and Commonwealth is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Tax Managed and Commonwealth Global Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Global 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 Tax Managed are associated (or correlated) with Commonwealth Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Global has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Commonwealth Global go up and down completely randomly.

Pair Corralation between Goldman Sachs and Commonwealth Global

Assuming the 90 days horizon Goldman Sachs Tax Managed is expected to generate 1.15 times more return on investment than Commonwealth Global. However, Goldman Sachs is 1.15 times more volatile than Commonwealth Global Fund. It trades about 0.18 of its potential returns per unit of risk. Commonwealth Global Fund is currently generating about 0.11 per unit of risk. If you would invest  4,087  in Goldman Sachs Tax Managed on September 12, 2024 and sell it today you would earn a total of  354.00  from holding Goldman Sachs Tax Managed or generate 8.66% return on investment over 90 days.

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

Goldman Sachs Tax Managed  vs.  Commonwealth Global Fund

Goldman Sachs Tax

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Tax Managed are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Goldman Sachs may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Commonwealth Global

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Global Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Commonwealth Global 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 Commonwealth Global

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

The idea behind Goldman Sachs Tax Managed and Commonwealth Global 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 Global Correlations module to find global opportunities by holding instruments from different markets.