Correlation Between Goldman Sachs and Main Sector

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

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

Diversification Opportunities for Goldman Sachs and Main Sector

0.98

Correlation Coefficient

Goldman Sachs  Main Sector

Almost no diversification

The 3 months correlation between Goldman and Main is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Innovate and Main Sector Rotation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Main Sector Rotation 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 Innovate are associated (or correlated) with Main Sector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Main Sector Rotation has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Main Sector go up and down completely randomly.

Pair Corralation between Goldman Sachs and Main Sector

Given the investment horizon of 90 days Goldman Sachs Innovate is expected to generate 1.0 times more return on investment than Main Sector. However, Goldman Sachs is 1.0 times more volatile than Main Sector Rotation. It trades about 0.04 of its potential returns per unit of risk. Main Sector Rotation is currently generating about 0.02 per unit of risk. If you would invest  6,252  in Goldman Sachs Innovate on October 22, 2024 and sell it today you would earn a total of  40.40  from holding Goldman Sachs Innovate or generate 0.65% return on investment over 90 days.

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

Goldman Sachs Innovate  vs.  Main Sector Rotation

Goldman Sachs Innovate

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Innovate are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Goldman Sachs is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Main Sector Rotation

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Main Sector Rotation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Main Sector is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Goldman Sachs and Main Sector

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

The idea behind Goldman Sachs Innovate and Main Sector Rotation 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.