Correlation Between Pimco Small and Goldman Sachs

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

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

Diversification Opportunities for Pimco Small and Goldman Sachs

0.34

Correlation Coefficient

Pimco Small  Goldman Sachs

Weak diversification

The 3 months correlation between Pimco and Goldman is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Small Cap and Goldman Sachs Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Balanced and Pimco Small 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 Pimco Small 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 Balanced has no effect on the direction of Pimco Small i.e., Pimco Small and Goldman Sachs go up and down completely randomly.

Pair Corralation between Pimco Small and Goldman Sachs

Assuming the 90 days horizon Pimco Small Cap is expected to under-perform the Goldman Sachs. In addition to that, Pimco Small is 2.89 times more volatile than Goldman Sachs Balanced. It trades about -0.14 of its total potential returns per unit of risk. Goldman Sachs Balanced is currently generating about 0.12 per unit of volatility. If you would invest  1,210  in Goldman Sachs Balanced on December 5, 2024 and sell it today you would earn a total of  22.00  from holding Goldman Sachs Balanced or generate 1.82% return on investment over 90 days.

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

Pimco Small Cap  vs.  Goldman Sachs Balanced

Pimco Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pimco Small 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 basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Goldman Sachs Balanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goldman Sachs Balanced 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.

Pair Trading with Pimco Small and Goldman Sachs

The main advantage of trading using opposite Pimco Small and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pimco Small 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 Pimco Small Cap and Goldman Sachs Balanced 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.