Correlation Between Total Income and Goldman Sachs

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

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

Diversification Opportunities for Total Income and Goldman Sachs

0.83

Correlation Coefficient

Total Income  Goldman Sachs

Very poor diversification

The 3 months correlation between Total and Goldman is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Total Income Real and Goldman Sachs Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Real and Total Income 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 Total Income Real 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 Real has no effect on the direction of Total Income i.e., Total Income and Goldman Sachs go up and down completely randomly.

Pair Corralation between Total Income and Goldman Sachs

Assuming the 90 days horizon Total Income Real is expected to under-perform the Goldman Sachs. But the mutual fund apears to be less risky and, when comparing its historical volatility, Total Income Real is 3.53 times less risky than Goldman Sachs. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Goldman Sachs Real is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,164  in Goldman Sachs Real on October 7, 2024 and sell it today you would earn a total of  27.00  from holding Goldman Sachs Real or generate 2.32% return on investment over 90 days.

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

Total Income Real  vs.  Goldman Sachs Real

Total Income Real

Risk-Adjusted Performance

0 of 100

Very Weak

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

Goldman Sachs Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Real 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 Total Income and Goldman Sachs

The main advantage of trading using opposite Total Income and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Total Income 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 Total Income Real and Goldman Sachs Real 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 Anywhere module to track or share privately all of your investments from the convenience of any device.