Correlation Between Dimensional Retirement and Goldman Sachs

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

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

Diversification Opportunities for Dimensional Retirement and Goldman Sachs

0.74

Correlation Coefficient

Dimensional Retirement  Goldman Sachs

Poor diversification

The 3 months correlation between Dimensional and Goldman is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Retirement Income and Goldman Sachs Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Equity and Dimensional Retirement 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 Dimensional Retirement Income 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 Equity has no effect on the direction of Dimensional Retirement i.e., Dimensional Retirement and Goldman Sachs go up and down completely randomly.

Pair Corralation between Dimensional Retirement and Goldman Sachs

Assuming the 90 days horizon Dimensional Retirement Income is expected to generate 0.2 times more return on investment than Goldman Sachs. However, Dimensional Retirement Income is 4.96 times less risky than Goldman Sachs. It trades about -0.36 of its potential returns per unit of risk. Goldman Sachs Equity is currently generating about -0.21 per unit of risk. If you would invest  1,167  in Dimensional Retirement Income on October 8, 2024 and sell it today you would lose (24.00) from holding Dimensional Retirement Income or give up 2.06% of portfolio value over 90 days.

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

Dimensional Retirement Income  vs.  Goldman Sachs Equity

Dimensional Retirement

Risk-Adjusted Performance

0 of 100

Very Weak

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

Goldman Sachs Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Equity has generated negative risk-adjusted returns adding no value to fund investors. 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 Dimensional Retirement and Goldman Sachs

The main advantage of trading using opposite Dimensional Retirement and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Retirement 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 Dimensional Retirement Income and Goldman Sachs Equity 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.