Correlation Between Us Government and Goldman Sachs

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

By analyzing existing cross correlation between Us Government Plus and Goldman Sachs Clean, you can compare the effects of market volatilities on Us Government and Goldman Sachs 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 Us Government with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and Goldman Sachs.

Diversification Opportunities for Us Government and Goldman Sachs

0.82

Correlation Coefficient

Us Government  Goldman Sachs

Very poor diversification

The 3 months correlation between GVPIX and Goldman is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Plus and Goldman Sachs Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Clean and Us Government 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 Us Government Plus are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Clean has no effect on the direction of Us Government i.e., Us Government and Goldman Sachs go up and down completely randomly.

Pair Corralation between Us Government and Goldman Sachs

Assuming the 90 days horizon Us Government Plus is expected to under-perform the Goldman Sachs. But the mutual fund apears to be less risky and, when comparing its historical volatility, Us Government Plus is 1.05 times less risky than Goldman Sachs. The mutual fund trades about -0.54 of its potential returns per unit of risk. The Goldman Sachs Clean is currently generating about -0.44 of returns per unit of risk over similar time horizon. If you would invest  889.00  in Goldman Sachs Clean on September 29, 2024 and sell it today you would lose (67.00) from holding Goldman Sachs Clean or give up 7.54% of portfolio value over 90 days.

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

Us Government Plus  vs.  Goldman Sachs Clean

Us Government Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Us Government Plus has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Goldman Sachs Clean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Clean has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental drivers remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Us Government and Goldman Sachs

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

The idea behind Us Government Plus and Goldman Sachs Clean 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.