Correlation Between Small Cap and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value and Goldman Sachs Small, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Goldman Sachs.
Diversification Opportunities for Small Cap and Goldman Sachs
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Small and Goldman is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value and Goldman Sachs Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Small and Small Cap 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 Small Cap Value 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 Small has no effect on the direction of Small Cap i.e., Small Cap and Goldman Sachs go up and down completely randomly.
Pair Corralation between Small Cap and Goldman Sachs
Assuming the 90 days horizon Small Cap is expected to generate 1.37 times less return on investment than Goldman Sachs. In addition to that, Small Cap is 1.01 times more volatile than Goldman Sachs Small. It trades about 0.05 of its total potential returns per unit of risk. Goldman Sachs Small is currently generating about 0.07 per unit of volatility. If you would invest 2,183 in Goldman Sachs Small on September 12, 2024 and sell it today you would earn a total of 1,145 from holding Goldman Sachs Small or generate 52.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value vs. Goldman Sachs Small
Performance |
| Timeline |
| Small Cap Value |
| Goldman Sachs Small |
Small Cap and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Goldman Sachs
The main advantage of trading using opposite Small Cap and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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.| Small Cap vs. Cmg Ultra Short | Small Cap vs. Prudential Short Duration | Small Cap vs. Easterly Snow Longshort | Small Cap vs. Aqr Long Short Equity |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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