Correlation Between American Mutual and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both American Mutual 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 American Mutual and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Mutual Fund and Goldman Sachs Focused, you can compare the effects of market volatilities on American Mutual 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 American Mutual with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Goldman Sachs.
Diversification Opportunities for American Mutual and Goldman Sachs
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Goldman is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and Goldman Sachs Focused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Focused and American Mutual 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 American Mutual 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 Focused has no effect on the direction of American Mutual i.e., American Mutual and Goldman Sachs go up and down completely randomly.
Pair Corralation between American Mutual and Goldman Sachs
Assuming the 90 days horizon American Mutual is expected to generate 3.63 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, American Mutual Fund is 1.25 times less risky than Goldman Sachs. It trades about 0.08 of its potential returns per unit of risk. Goldman Sachs Focused is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 1,681 in Goldman Sachs Focused on August 28, 2024 and sell it today you would earn a total of 74.00 from holding Goldman Sachs Focused or generate 4.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Mutual Fund vs. Goldman Sachs Focused
Performance |
| Timeline |
| American Mutual |
| Goldman Sachs Focused |
American Mutual and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Mutual and Goldman Sachs
The main advantage of trading using opposite American Mutual and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual 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.| American Mutual vs. Amcap Fund Class | American Mutual vs. American Balanced Fund | American Mutual vs. New Perspective Fund | American Mutual vs. New World Fund |
| Goldman Sachs vs. Goldman Sachs Clean | Goldman Sachs vs. Goldman Sachs Clean | Goldman Sachs vs. Goldman Sachs Clean | Goldman Sachs vs. Goldman Sachs Clean |
Check out your portfolio center.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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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