Correlation Between Goldman Sachs and Foreign Smaller

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

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

Diversification Opportunities for Goldman Sachs and Foreign Smaller

0.67

Correlation Coefficient

Goldman Sachs  Foreign Smaller

Poor diversification

The 3 months correlation between Goldman and Foreign is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs International and Foreign Smaller Panies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foreign Smaller Panies 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 International are associated (or correlated) with Foreign Smaller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foreign Smaller Panies has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Foreign Smaller go up and down completely randomly.

Pair Corralation between Goldman Sachs and Foreign Smaller

Assuming the 90 days horizon Goldman Sachs International is expected to generate 1.03 times more return on investment than Foreign Smaller. However, Goldman Sachs is 1.03 times more volatile than Foreign Smaller Panies. It trades about 0.17 of its potential returns per unit of risk. Foreign Smaller Panies is currently generating about 0.01 per unit of risk. If you would invest  1,229  in Goldman Sachs International on December 30, 2024 and sell it today you would earn a total of  106.00  from holding Goldman Sachs International or generate 8.62% return on investment over 90 days.

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

Goldman Sachs International  vs.  Foreign Smaller Panies

Goldman Sachs Intern

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs International are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Goldman Sachs may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Foreign Smaller Panies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Foreign Smaller Panies has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Foreign Smaller 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 Foreign Smaller

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

The idea behind Goldman Sachs International and Foreign Smaller Panies 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.