Correlation Between Goldman Sachs and Stone Toro

Can any of the company-specific risk be diversified away by investing in both Goldman Sachs and Stone Toro 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 Stone Toro 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 Stone Toro Market, you can compare the effects of market volatilities on Goldman Sachs and Stone Toro 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 Stone Toro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and Stone Toro.

Diversification Opportunities for Goldman Sachs and Stone Toro

0.78

Correlation Coefficient

Goldman Sachs  Stone Toro

Poor diversification

The 3 months correlation between Goldman and Stone is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs High and Stone Toro Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Toro Market 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 Stone Toro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Toro Market has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Stone Toro go up and down completely randomly.

Pair Corralation between Goldman Sachs and Stone Toro

Assuming the 90 days horizon Goldman Sachs High is expected to generate 1.07 times more return on investment than Stone Toro. However, Goldman Sachs is 1.07 times more volatile than Stone Toro Market. It trades about 0.19 of its potential returns per unit of risk. Stone Toro Market is currently generating about 0.15 per unit of risk. If you would invest  927.00  in Goldman Sachs High on August 30, 2024 and sell it today you would earn a total of  15.00  from holding Goldman Sachs High or generate 1.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Goldman Sachs High  vs.  Stone Toro Market

Goldman Sachs High

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs High are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Stone Toro Market

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stone Toro Market has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Stone Toro 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 Stone Toro

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

The idea behind Goldman Sachs High and Stone Toro Market 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.