Correlation Between World Growth and Goldman Sachs

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

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

Diversification Opportunities for World Growth and Goldman Sachs

0.19

Correlation Coefficient

World Growth  Goldman Sachs

Average diversification

The 3 months correlation between World and Goldman is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding World Growth Fund 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 World Growth 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 World Growth Fund 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 World Growth i.e., World Growth and Goldman Sachs go up and down completely randomly.

Pair Corralation between World Growth and Goldman Sachs

Assuming the 90 days horizon World Growth Fund is expected to generate 0.68 times more return on investment than Goldman Sachs. However, World Growth Fund is 1.47 times less risky than Goldman Sachs. It trades about 0.09 of its potential returns per unit of risk. Goldman Sachs Clean is currently generating about -0.05 per unit of risk. If you would invest  2,137  in World Growth Fund on September 23, 2024 and sell it today you would earn a total of  841.00  from holding World Growth Fund or generate 39.35% return on investment over 90 days.

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

World Growth Fund  vs.  Goldman Sachs Clean

World Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days World Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, World Growth 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

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Clean 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 fundamental drivers remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with World Growth and Goldman Sachs

The main advantage of trading using opposite World Growth and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Growth 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 World Growth Fund 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.