Correlation Between Goldman Sachs and Gold Portfolio

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

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

Diversification Opportunities for Goldman Sachs and Gold Portfolio

0.07

Correlation Coefficient

Goldman Sachs  Gold Portfolio

Significant diversification

The 3 months correlation between Goldman and Gold is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs High and Gold Portfolio Fidelity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Portfolio Fidelity 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 High are associated (or correlated) with Gold Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Portfolio Fidelity has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Gold Portfolio go up and down completely randomly.

Pair Corralation between Goldman Sachs and Gold Portfolio

Assuming the 90 days horizon Goldman Sachs High is expected to under-perform the Gold Portfolio. But the mutual fund apears to be less risky and, when comparing its historical volatility, Goldman Sachs High is 11.3 times less risky than Gold Portfolio. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Gold Portfolio Fidelity is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  2,329  in Gold Portfolio Fidelity on December 20, 2024 and sell it today you would earn a total of  723.00  from holding Gold Portfolio Fidelity or generate 31.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Goldman Sachs High  vs.  Gold Portfolio Fidelity

Goldman Sachs High

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goldman Sachs High has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gold Portfolio Fidelity

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Portfolio Fidelity are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Gold Portfolio showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goldman Sachs and Gold Portfolio

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

The idea behind Goldman Sachs High and Gold Portfolio Fidelity 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.