Correlation Between Goldman Sachs and Biotechnology Fund

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

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

Diversification Opportunities for Goldman Sachs and Biotechnology Fund

-0.46

Correlation Coefficient

Goldman Sachs  Biotechnology Fund

Very good diversification

The 3 months correlation between GOLDMAN and BIOTECHNOLOGY is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Technology and Biotechnology Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biotechnology Fund Class 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 Technology are associated (or correlated) with Biotechnology Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biotechnology Fund Class has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Biotechnology Fund go up and down completely randomly.

Pair Corralation between Goldman Sachs and Biotechnology Fund

Assuming the 90 days horizon Goldman Sachs Technology is expected to generate 0.99 times more return on investment than Biotechnology Fund. However, Goldman Sachs Technology is 1.01 times less risky than Biotechnology Fund. It trades about 0.19 of its potential returns per unit of risk. Biotechnology Fund Class is currently generating about -0.02 per unit of risk. If you would invest  2,520  in Goldman Sachs Technology on August 31, 2024 and sell it today you would earn a total of  351.00  from holding Goldman Sachs Technology or generate 13.93% return on investment over 90 days.

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

Goldman Sachs Technology  vs.  Biotechnology Fund Class

Goldman Sachs Technology

Risk-Adjusted Performance

15 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Technology are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Goldman Sachs showed solid returns over the last few months and may actually be approaching a breakup point.

Biotechnology Fund Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biotechnology Fund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Biotechnology Fund 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 Biotechnology Fund

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

The idea behind Goldman Sachs Technology and Biotechnology Fund Class 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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.