Correlation Between Schwab Small and Goldman Sachs

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

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

Diversification Opportunities for Schwab Small and Goldman Sachs

0.58

Correlation Coefficient

Schwab Small  Goldman Sachs

Very weak diversification

The 3 months correlation between Schwab and Goldman is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Small Cap Index and Goldman Sachs Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Large and Schwab Small 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 Schwab Small Cap Index 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 Large has no effect on the direction of Schwab Small i.e., Schwab Small and Goldman Sachs go up and down completely randomly.

Pair Corralation between Schwab Small and Goldman Sachs

Assuming the 90 days horizon Schwab Small Cap Index is expected to generate 1.44 times more return on investment than Goldman Sachs. However, Schwab Small is 1.44 times more volatile than Goldman Sachs Large. It trades about 0.03 of its potential returns per unit of risk. Goldman Sachs Large is currently generating about 0.03 per unit of risk. If you would invest  3,110  in Schwab Small Cap Index on October 24, 2024 and sell it today you would earn a total of  603.00  from holding Schwab Small Cap Index or generate 19.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Schwab Small Cap Index  vs.  Goldman Sachs Large

Schwab Small Cap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Small Cap Index are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Schwab Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs Large

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Large 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 Schwab Small and Goldman Sachs

The main advantage of trading using opposite Schwab Small and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Small 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 Schwab Small Cap Index and Goldman Sachs Large 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.