Correlation Between Strats SM and Goldman Sachs

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

By analyzing existing cross correlation between Strats SM Trust and Goldman Sachs Capital, you can compare the effects of market volatilities on Strats SM and Goldman Sachs 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 Strats SM with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strats SM and Goldman Sachs.

Diversification Opportunities for Strats SM and Goldman Sachs

0.07

Correlation Coefficient

Strats SM  Goldman Sachs

Significant diversification

The 3 months correlation between Strats and Goldman is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Strats SM Trust and Goldman Sachs Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Capital and Strats SM 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 Strats SM Trust are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Capital has no effect on the direction of Strats SM i.e., Strats SM and Goldman Sachs go up and down completely randomly.

Pair Corralation between Strats SM and Goldman Sachs

Considering the 90-day investment horizon Strats SM Trust is expected to under-perform the Goldman Sachs. But the stock apears to be less risky and, when comparing its historical volatility, Strats SM Trust is 7.69 times less risky than Goldman Sachs. The stock trades about -0.16 of its potential returns per unit of risk. The Goldman Sachs Capital is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,635  in Goldman Sachs Capital on September 23, 2024 and sell it today you would earn a total of  55.00  from holding Goldman Sachs Capital or generate 2.09% return on investment over 90 days.

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

Strats SM Trust  vs.  Goldman Sachs Capital

Strats SM Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strats SM Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking indicators, Strats SM is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Goldman Sachs Capital

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Capital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Goldman Sachs is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Strats SM and Goldman Sachs

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

The idea behind Strats SM Trust and Goldman Sachs Capital 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.