Correlation Between Mid Capitalization and Goldman Sachs

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

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

Diversification Opportunities for Mid Capitalization and Goldman Sachs

-0.8

Correlation Coefficient

Mid Capitalization  Goldman Sachs

Pay attention - limited upside

The 3 months correlation between Mid and Goldman is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Mid Capitalization Portfolio and Goldman Sachs Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Clean and Mid Capitalization 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 Mid Capitalization Portfolio 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 Clean has no effect on the direction of Mid Capitalization i.e., Mid Capitalization and Goldman Sachs go up and down completely randomly.

Pair Corralation between Mid Capitalization and Goldman Sachs

Assuming the 90 days horizon Mid Capitalization Portfolio is expected to under-perform the Goldman Sachs. In addition to that, Mid Capitalization is 1.16 times more volatile than Goldman Sachs Clean. It trades about -0.06 of its total potential returns per unit of risk. Goldman Sachs Clean is currently generating about 0.07 per unit of volatility. If you would invest  816.00  in Goldman Sachs Clean on December 28, 2024 and sell it today you would earn a total of  33.00  from holding Goldman Sachs Clean or generate 4.04% return on investment over 90 days.

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

Mid Capitalization Portfolio  vs.  Goldman Sachs Clean

Mid Capitalization

Risk-Adjusted Performance

Very Weak

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

Goldman Sachs Clean

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Clean are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, 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 Mid Capitalization and Goldman Sachs

The main advantage of trading using opposite Mid Capitalization and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Capitalization 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 Mid Capitalization Portfolio and Goldman Sachs Clean 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.