Correlation Between Commodities Strategy and Goldman Sachs

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

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

Diversification Opportunities for Commodities Strategy and Goldman Sachs

-0.25

Correlation Coefficient

Commodities Strategy  Goldman Sachs

Very good diversification

The 3 months correlation between Commodities and Goldman is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Commodities Strategy Fund 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 Commodities Strategy 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 Commodities Strategy Fund 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 Commodities Strategy i.e., Commodities Strategy and Goldman Sachs go up and down completely randomly.

Pair Corralation between Commodities Strategy and Goldman Sachs

Assuming the 90 days horizon Commodities Strategy is expected to generate 14.87 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Commodities Strategy Fund is 1.18 times less risky than Goldman Sachs. It trades about 0.01 of its potential returns per unit of risk. Goldman Sachs Technology is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,894  in Goldman Sachs Technology on October 11, 2024 and sell it today you would earn a total of  1,654  from holding Goldman Sachs Technology or generate 87.33% return on investment over 90 days.

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

Commodities Strategy Fund  vs.  Goldman Sachs Technology

Commodities Strategy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Goldman Sachs Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Technology are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. 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 Commodities Strategy and Goldman Sachs

The main advantage of trading using opposite Commodities Strategy and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commodities Strategy 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 Commodities Strategy Fund 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.