Correlation Between Biotechnology Fund and Goldman Sachs

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

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

Diversification Opportunities for Biotechnology Fund and Goldman Sachs

-0.45

Correlation Coefficient

Biotechnology Fund  Goldman Sachs

Very good diversification

The 3 months correlation between Biotechnology and Goldman is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Biotechnology Fund Class and Goldman Sachs Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Technology and Biotechnology Fund 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 Biotechnology Fund Class 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 Technology has no effect on the direction of Biotechnology Fund i.e., Biotechnology Fund and Goldman Sachs go up and down completely randomly.

Pair Corralation between Biotechnology Fund and Goldman Sachs

Assuming the 90 days horizon Biotechnology Fund Class is expected to under-perform the Goldman Sachs. In addition to that, Biotechnology Fund is 1.01 times more volatile than Goldman Sachs Technology. It trades about -0.02 of its total potential returns per unit of risk. Goldman Sachs Technology is currently generating about 0.19 per unit of volatility. If you would invest  3,115  in Goldman Sachs Technology on September 3, 2024 and sell it today you would earn a total of  436.00  from holding Goldman Sachs Technology or generate 14.0% return on investment over 90 days.

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

Biotechnology Fund Class  vs.  Goldman Sachs Technology

Biotechnology Fund Class

Risk-Adjusted Performance

0 of 100

Very Weak

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

Goldman Sachs Technology

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Technology are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Goldman Sachs showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biotechnology Fund and Goldman Sachs

The main advantage of trading using opposite Biotechnology Fund and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biotechnology Fund 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 Biotechnology Fund Class and Goldman Sachs Technology 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.