Correlation Between Large-cap Growth and Goldman Sachs

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

By analyzing existing cross correlation between Large Cap Growth Profund and Goldman Sachs High, you can compare the effects of market volatilities on Large-cap Growth 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 Large-cap Growth with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large-cap Growth and Goldman Sachs.

Diversification Opportunities for Large-cap Growth and Goldman Sachs

-0.08

Correlation Coefficient

Large-cap Growth  Goldman Sachs

Good diversification

The 3 months correlation between Large-cap and Goldman is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Growth Profund and Goldman Sachs High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs High and Large-cap Growth 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 Large Cap Growth Profund 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 High has no effect on the direction of Large-cap Growth i.e., Large-cap Growth and Goldman Sachs go up and down completely randomly.

Pair Corralation between Large-cap Growth and Goldman Sachs

Assuming the 90 days horizon Large Cap Growth Profund is expected to generate 4.39 times more return on investment than Goldman Sachs. However, Large-cap Growth is 4.39 times more volatile than Goldman Sachs High. It trades about 0.06 of its potential returns per unit of risk. Goldman Sachs High is currently generating about 0.07 per unit of risk. If you would invest  3,728  in Large Cap Growth Profund on December 5, 2024 and sell it today you would earn a total of  682.00  from holding Large Cap Growth Profund or generate 18.29% return on investment over 90 days.

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

Large Cap Growth Profund  vs.  Goldman Sachs High

Large Cap Growth

Risk-Adjusted Performance

Very Weak

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

Goldman Sachs High

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Large-cap Growth and Goldman Sachs

The main advantage of trading using opposite Large-cap Growth and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large-cap Growth 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 Large Cap Growth Profund and Goldman Sachs High 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.