Correlation Between Rational Strategic and Goldman Sachs

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

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

Diversification Opportunities for Rational Strategic and Goldman Sachs

0.64

Correlation Coefficient

Rational Strategic  Goldman Sachs

Poor diversification

The 3 months correlation between Rational and Goldman is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Rational Strategic Allocation and Goldman Sachs Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Equity and Rational Strategic 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 Rational Strategic Allocation 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 Equity has no effect on the direction of Rational Strategic i.e., Rational Strategic and Goldman Sachs go up and down completely randomly.

Pair Corralation between Rational Strategic and Goldman Sachs

Assuming the 90 days horizon Rational Strategic Allocation is expected to under-perform the Goldman Sachs. In addition to that, Rational Strategic is 2.21 times more volatile than Goldman Sachs Equity. It trades about -0.11 of its total potential returns per unit of risk. Goldman Sachs Equity is currently generating about -0.07 per unit of volatility. If you would invest  1,715  in Goldman Sachs Equity on December 21, 2024 and sell it today you would lose (67.00) from holding Goldman Sachs Equity or give up 3.91% of portfolio value over 90 days.

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

Rational Strategic Allocation  vs.  Goldman Sachs Equity

Rational Strategic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rational Strategic Allocation 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 Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goldman Sachs Equity 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 Rational Strategic and Goldman Sachs

The main advantage of trading using opposite Rational Strategic and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rational Strategic 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 Rational Strategic Allocation and Goldman Sachs Equity 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.