Correlation Between Goldman Sachs and Mid Cap

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

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

Diversification Opportunities for Goldman Sachs and Mid Cap

0.65

Correlation Coefficient

Goldman Sachs  Mid Cap

Poor diversification

The 3 months correlation between Goldman and Mid is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Small and Mid Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Growth 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 Small are associated (or correlated) with Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Growth has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Mid Cap go up and down completely randomly.

Pair Corralation between Goldman Sachs and Mid Cap

Assuming the 90 days horizon Goldman Sachs Small is expected to generate 0.63 times more return on investment than Mid Cap. However, Goldman Sachs Small is 1.58 times less risky than Mid Cap. It trades about -0.05 of its potential returns per unit of risk. Mid Cap Growth is currently generating about -0.08 per unit of risk. If you would invest  4,018  in Goldman Sachs Small on December 20, 2024 and sell it today you would lose (133.00) from holding Goldman Sachs Small or give up 3.31% of portfolio value over 90 days.

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

Goldman Sachs Small  vs.  Mid Cap Growth

Goldman Sachs Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goldman Sachs Small 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.

Mid Cap Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mid Cap Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Goldman Sachs and Mid Cap

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

The idea behind Goldman Sachs Small and Mid Cap Growth 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.