Correlation Between M Large and Goldman Sachs

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

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

Diversification Opportunities for M Large and Goldman Sachs

0.36

Correlation Coefficient

M Large  Goldman Sachs

Weak diversification

The 3 months correlation between MTCGX and Goldman is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding M Large Cap and Goldman Sachs Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Tactical and M Large 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 M Large Cap 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 Tactical has no effect on the direction of M Large i.e., M Large and Goldman Sachs go up and down completely randomly.

Pair Corralation between M Large and Goldman Sachs

Assuming the 90 days horizon M Large Cap is expected to generate 3.73 times more return on investment than Goldman Sachs. However, M Large is 3.73 times more volatile than Goldman Sachs Tactical. It trades about 0.04 of its potential returns per unit of risk. Goldman Sachs Tactical is currently generating about -0.03 per unit of risk. If you would invest  2,956  in M Large Cap on October 9, 2024 and sell it today you would earn a total of  415.00  from holding M Large Cap or generate 14.04% return on investment over 90 days.

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

M Large Cap  vs.  Goldman Sachs Tactical

M Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Goldman Sachs Tactical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Tactical has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and 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 M Large and Goldman Sachs

The main advantage of trading using opposite M Large and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M Large 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 M Large Cap and Goldman Sachs Tactical 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 Transaction History module to view history of all your transactions and understand their impact on performance.