Correlation Between Pax Large and Goldman Sachs

Can any of the company-specific risk be diversified away by investing in both Pax 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 Pax 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 Pax Large Cap and Goldman Sachs Capital, you can compare the effects of market volatilities on Pax 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 Pax Large with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pax Large and Goldman Sachs.

Diversification Opportunities for Pax Large and Goldman Sachs

0.7

Correlation Coefficient

Pax Large  Goldman Sachs

Poor diversification

The 3 months correlation between Pax and Goldman is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Pax Large Cap and Goldman Sachs Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Capital and Pax 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 Pax 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 Capital has no effect on the direction of Pax Large i.e., Pax Large and Goldman Sachs go up and down completely randomly.

Pair Corralation between Pax Large and Goldman Sachs

Assuming the 90 days horizon Pax Large is expected to generate 2.27 times less return on investment than Goldman Sachs. In addition to that, Pax Large is 1.09 times more volatile than Goldman Sachs Capital. It trades about 0.03 of its total potential returns per unit of risk. Goldman Sachs Capital is currently generating about 0.07 per unit of volatility. If you would invest  2,478  in Goldman Sachs Capital on October 10, 2024 and sell it today you would earn a total of  921.00  from holding Goldman Sachs Capital or generate 37.17% return on investment over 90 days.

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

Pax Large Cap  vs.  Goldman Sachs Capital

Pax Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pax Large Cap 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 essential indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Goldman Sachs Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Capital 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 Pax Large and Goldman Sachs

The main advantage of trading using opposite Pax Large and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pax 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 Pax Large Cap and Goldman Sachs Capital 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.