Correlation Between Goldman Sachs and M Large

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

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

Diversification Opportunities for Goldman Sachs and M Large

0.42

Correlation Coefficient

Goldman Sachs  M Large

Very weak diversification

The 3 months correlation between Goldman and MTCGX is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Equity and M Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Large Cap 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 Equity are associated (or correlated) with M Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Large Cap has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and M Large go up and down completely randomly.

Pair Corralation between Goldman Sachs and M Large

Assuming the 90 days horizon Goldman Sachs is expected to generate 1.79 times less return on investment than M Large. But when comparing it to its historical volatility, Goldman Sachs Equity is 1.56 times less risky than M Large. It trades about 0.06 of its potential returns per unit of risk. M Large Cap is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,516  in M Large Cap on September 28, 2024 and sell it today you would earn a total of  1,191  from holding M Large Cap or generate 47.34% return on investment over 90 days.

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

Goldman Sachs Equity  vs.  M Large Cap

Goldman Sachs Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

M Large Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in M Large Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, M Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Goldman Sachs and M Large

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

The idea behind Goldman Sachs Equity and M Large Cap 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.