Correlation Between Baird Smallmid and Goldman Sachs

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Can any of the company-specific risk be diversified away by investing in both Baird Smallmid 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 Baird Smallmid and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baird Smallmid Cap and Goldman Sachs Large, you can compare the effects of market volatilities on Baird Smallmid 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 Baird Smallmid with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baird Smallmid and Goldman Sachs.

Diversification Opportunities for Baird Smallmid and Goldman Sachs

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Baird and Goldman is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Baird Smallmid Cap and Goldman Sachs Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Large and Baird Smallmid 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 Baird Smallmid Cap 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 Large has no effect on the direction of Baird Smallmid i.e., Baird Smallmid and Goldman Sachs go up and down completely randomly.

Pair Corralation between Baird Smallmid and Goldman Sachs

Assuming the 90 days horizon Baird Smallmid is expected to generate 2.37 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Baird Smallmid Cap is 1.02 times less risky than Goldman Sachs. It trades about 0.05 of its potential returns per unit of risk. Goldman Sachs Large is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,159  in Goldman Sachs Large on September 12, 2024 and sell it today you would earn a total of  1,705  from holding Goldman Sachs Large or generate 78.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Baird Smallmid Cap  vs.  Goldman Sachs Large

 Performance 
       Timeline  
Baird Smallmid Cap 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Baird Smallmid Cap are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baird Smallmid showed solid returns over the last few months and may actually be approaching a breakup point.
Goldman Sachs Large 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Large are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Goldman Sachs may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Baird Smallmid and Goldman Sachs Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Baird Smallmid and Goldman Sachs

The main advantage of trading using opposite Baird Smallmid and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baird Smallmid 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 Baird Smallmid Cap and Goldman Sachs Large 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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