Correlation Between Health Care and Goldman Sachs

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

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

Diversification Opportunities for Health Care and Goldman Sachs

0.0

Correlation Coefficient

Health Care  Goldman Sachs

Pay attention - limited upside

The 3 months correlation between Health and Goldman is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Select and Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs and Health Care 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 Health Care Select 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 has no effect on the direction of Health Care i.e., Health Care and Goldman Sachs go up and down completely randomly.

Pair Corralation between Health Care and Goldman Sachs

If you would invest  13,567  in Health Care Select on December 19, 2024 and sell it today you would earn a total of  1,117  from holding Health Care Select or generate 8.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Health Care Select  vs.  Goldman Sachs

Health Care Select

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Health Care Select are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Health Care may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Goldman Sachs

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goldman Sachs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat 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 Health Care and Goldman Sachs

The main advantage of trading using opposite Health Care and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care 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 Health Care Select and Goldman Sachs 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.