Correlation Between GOLDMAN SACHS and Meta Platforms

Can any of the company-specific risk be diversified away by investing in both GOLDMAN SACHS and Meta Platforms 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 Meta Platforms into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GOLDMAN SACHS CDR and Meta Platforms CDR, you can compare the effects of market volatilities on GOLDMAN SACHS and Meta Platforms 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 Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of GOLDMAN SACHS and Meta Platforms.

Diversification Opportunities for GOLDMAN SACHS and Meta Platforms

0.85

Correlation Coefficient

GOLDMAN SACHS  Meta Platforms

Very poor diversification

The 3 months correlation between GOLDMAN and Meta is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding GOLDMAN SACHS CDR and Meta Platforms CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms CDR 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 CDR are associated (or correlated) with Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms CDR has no effect on the direction of GOLDMAN SACHS i.e., GOLDMAN SACHS and Meta Platforms go up and down completely randomly.

Pair Corralation between GOLDMAN SACHS and Meta Platforms

Assuming the 90 days trading horizon GOLDMAN SACHS is expected to generate 1.78 times less return on investment than Meta Platforms. But when comparing it to its historical volatility, GOLDMAN SACHS CDR is 1.02 times less risky than Meta Platforms. It trades about 0.02 of its potential returns per unit of risk. Meta Platforms CDR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,326  in Meta Platforms CDR on December 26, 2024 and sell it today you would earn a total of  123.00  from holding Meta Platforms CDR or generate 3.7% return on investment over 90 days.

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

GOLDMAN SACHS CDR  vs.  Meta Platforms CDR

GOLDMAN SACHS CDR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GOLDMAN SACHS CDR are ranked lower than 1 (%) 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 current stock price disarray, may contribute to short-term losses for the investors.

Meta Platforms CDR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Meta Platforms CDR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Meta Platforms is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GOLDMAN SACHS and Meta Platforms

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

The idea behind GOLDMAN SACHS CDR and Meta Platforms CDR 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.