Correlation Between Stifel Financial and Goldman Sachs

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

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

Diversification Opportunities for Stifel Financial and Goldman Sachs

0.48

Correlation Coefficient

Stifel Financial  Goldman Sachs

Very weak diversification

The 3 months correlation between Stifel and Goldman is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Stifel Financial Corp and The Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs and Stifel Financial 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 Stifel Financial Corp 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 has no effect on the direction of Stifel Financial i.e., Stifel Financial and Goldman Sachs go up and down completely randomly.

Pair Corralation between Stifel Financial and Goldman Sachs

Assuming the 90 days horizon Stifel Financial Corp is expected to under-perform the Goldman Sachs. In addition to that, Stifel Financial is 1.31 times more volatile than The Goldman Sachs. It trades about -0.02 of its total potential returns per unit of risk. The Goldman Sachs is currently generating about -0.01 per unit of volatility. If you would invest  2,341  in The Goldman Sachs on November 29, 2024 and sell it today you would lose (7.00) from holding The Goldman Sachs or give up 0.3% of portfolio value over 90 days.

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

Stifel Financial Corp  vs.  The Goldman Sachs

Stifel Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stifel Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Stifel Financial is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Goldman Sachs

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Goldman Sachs has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Stifel Financial and Goldman Sachs

The main advantage of trading using opposite Stifel Financial and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stifel Financial 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 Stifel Financial Corp and The Goldman Sachs 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.