Correlation Between Goldman Sachs and Design Therapeutics

Can any of the company-specific risk be diversified away by investing in both Goldman Sachs and Design Therapeutics 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 Design Therapeutics 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 Design Therapeutics, you can compare the effects of market volatilities on Goldman Sachs and Design Therapeutics 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 Design Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and Design Therapeutics.

Diversification Opportunities for Goldman Sachs and Design Therapeutics

0.77

Correlation Coefficient

Goldman Sachs  Design Therapeutics

Poor diversification

The 3 months correlation between Goldman and Design is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Group and Design Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Design Therapeutics 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 Design Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Design Therapeutics has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Design Therapeutics go up and down completely randomly.

Pair Corralation between Goldman Sachs and Design Therapeutics

Allowing for the 90-day total investment horizon Goldman Sachs Group is expected to generate 0.28 times more return on investment than Design Therapeutics. However, Goldman Sachs Group is 3.55 times less risky than Design Therapeutics. It trades about 0.08 of its potential returns per unit of risk. Design Therapeutics is currently generating about 0.02 per unit of risk. If you would invest  32,698  in Goldman Sachs Group on October 9, 2024 and sell it today you would earn a total of  25,067  from holding Goldman Sachs Group or generate 76.66% return on investment over 90 days.

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

Goldman Sachs Group  vs.  Design Therapeutics

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.

Design Therapeutics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Design Therapeutics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Design Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goldman Sachs and Design Therapeutics

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

The idea behind Goldman Sachs Group and Design Therapeutics 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.