Correlation Between Sarofim Equity and Goldman Sachs

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

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

Diversification Opportunities for Sarofim Equity and Goldman Sachs

0.67

Correlation Coefficient

Sarofim Equity  Goldman Sachs

Poor diversification

The 3 months correlation between Sarofim and Goldman is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Sarofim Equity and Goldman Sachs Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Small and Sarofim Equity 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 Sarofim Equity 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 Small has no effect on the direction of Sarofim Equity i.e., Sarofim Equity and Goldman Sachs go up and down completely randomly.

Pair Corralation between Sarofim Equity and Goldman Sachs

Assuming the 90 days horizon Sarofim Equity is expected to under-perform the Goldman Sachs. But the mutual fund apears to be less risky and, when comparing its historical volatility, Sarofim Equity is 1.24 times less risky than Goldman Sachs. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Goldman Sachs Small is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  4,723  in Goldman Sachs Small on October 23, 2024 and sell it today you would lose (560.00) from holding Goldman Sachs Small or give up 11.86% of portfolio value over 90 days.

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

Sarofim Equity  vs.  Goldman Sachs Small

Sarofim Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sarofim Equity 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 primary indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Goldman Sachs Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Sarofim Equity and Goldman Sachs

The main advantage of trading using opposite Sarofim Equity and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sarofim Equity 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 Sarofim Equity and Goldman Sachs Small 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.