Correlation Between Goldman Sachs and Mid-cap Value

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

By analyzing existing cross correlation between Goldman Sachs Government and Mid Cap Value Profund, you can compare the effects of market volatilities on Goldman Sachs and Mid-cap Value 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 Mid-cap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and Mid-cap Value.

Diversification Opportunities for Goldman Sachs and Mid-cap Value

0.36

Correlation Coefficient

Goldman Sachs  Mid-cap Value

Weak diversification

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

Pair Corralation between Goldman Sachs and Mid-cap Value

Assuming the 90 days horizon Goldman Sachs is expected to generate 2.39 times less return on investment than Mid-cap Value. But when comparing it to its historical volatility, Goldman Sachs Government is 2.74 times less risky than Mid-cap Value. It trades about 0.06 of its potential returns per unit of risk. Mid Cap Value Profund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,475  in Mid Cap Value Profund on December 2, 2024 and sell it today you would earn a total of  1,412  from holding Mid Cap Value Profund or generate 18.89% 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 Government  vs.  Mid Cap Value Profund

Goldman Sachs Government

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Government are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. 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.

Mid Cap Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mid Cap Value Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Mid-cap Value

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

The idea behind Goldman Sachs Government and Mid Cap Value 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.