Correlation Between Goldman Sachs and Morningstar Aggressive

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

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

Diversification Opportunities for Goldman Sachs and Morningstar Aggressive

0.36

Correlation Coefficient

Goldman Sachs  Morningstar Aggressive

Weak diversification

The 3 months correlation between GOLDMAN and Morningstar is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Short and Morningstar Aggressive Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morningstar Aggressive 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 Short are associated (or correlated) with Morningstar Aggressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morningstar Aggressive has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Morningstar Aggressive go up and down completely randomly.

Pair Corralation between Goldman Sachs and Morningstar Aggressive

Assuming the 90 days horizon Goldman Sachs is expected to generate 5.14 times less return on investment than Morningstar Aggressive. But when comparing it to its historical volatility, Goldman Sachs Short is 7.67 times less risky than Morningstar Aggressive. It trades about 0.11 of its potential returns per unit of risk. Morningstar Aggressive Growth is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,356  in Morningstar Aggressive Growth on October 9, 2024 and sell it today you would earn a total of  189.00  from holding Morningstar Aggressive Growth or generate 13.94% return on investment over 90 days.

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

Goldman Sachs Short  vs.  Morningstar Aggressive Growth

Goldman Sachs Short

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Short 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.

Morningstar Aggressive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morningstar Aggressive Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Morningstar Aggressive 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 Morningstar Aggressive

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

The idea behind Goldman Sachs Short and Morningstar Aggressive Growth 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.