Correlation Between Goldman Sachs and Cult Food

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

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

Diversification Opportunities for Goldman Sachs and Cult Food

-0.75

Correlation Coefficient

Goldman Sachs  Cult Food

Pay attention - limited upside

The 3 months correlation between Goldman and Cult is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Group and Cult Food Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cult Food Science 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 Group are associated (or correlated) with Cult Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cult Food Science has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Cult Food go up and down completely randomly.

Pair Corralation between Goldman Sachs and Cult Food

Allowing for the 90-day total investment horizon Goldman Sachs is expected to generate 2.79 times less return on investment than Cult Food. But when comparing it to its historical volatility, Goldman Sachs Group is 6.76 times less risky than Cult Food. It trades about 0.08 of its potential returns per unit of risk. Cult Food Science is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  9.00  in Cult Food Science on October 9, 2024 and sell it today you would lose (5.40) from holding Cult Food Science or give up 60.0% of portfolio value over 90 days.

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

Goldman Sachs Group  vs.  Cult Food Science

Goldman Sachs Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cult Food Science

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cult Food Science has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cult Food is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Goldman Sachs and Cult Food

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

The idea behind Goldman Sachs Group and Cult Food Science 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.