Correlation Between Bank of America and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Bank of America 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 Bank of America and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and The Goldman Sachs, you can compare the effects of market volatilities on Bank of America 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 Bank of America with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Goldman Sachs.
Diversification Opportunities for Bank of America and Goldman Sachs
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Goldman is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and The Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs and Bank of America 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 Bank of America 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 Bank of America i.e., Bank of America and Goldman Sachs go up and down completely randomly.
Pair Corralation between Bank of America and Goldman Sachs
Considering the 90-day investment horizon Bank of America is expected to generate 1.5 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Bank of America is 1.08 times less risky than Goldman Sachs. It trades about 0.06 of its potential returns per unit of risk. The Goldman Sachs is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 6,245 in The Goldman Sachs on September 3, 2024 and sell it today you would earn a total of 5,769 from holding The Goldman Sachs or generate 92.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
Bank of America vs. The Goldman Sachs
Performance |
| Timeline |
| Bank of America |
| Goldman Sachs |
Bank of America and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Goldman Sachs
The main advantage of trading using opposite Bank of America and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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.| Bank of America vs. Partner Communications | Bank of America vs. Merck Company | Bank of America vs. Western Midstream Partners | Bank of America vs. Edgewise Therapeutics |
| Goldman Sachs vs. Automatic Data Processing | Goldman Sachs vs. Deutsche Bank Aktiengesellschaft | Goldman Sachs vs. Sumitomo Mitsui Financial | Goldman Sachs vs. Lloyds Banking Group |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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