Correlation Between Dimensional Small and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Dimensional Small 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 Dimensional Small and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional Small Cap and Goldman Sachs ActiveBeta, you can compare the effects of market volatilities on Dimensional Small 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 Dimensional Small with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Small and Goldman Sachs.
Diversification Opportunities for Dimensional Small and Goldman Sachs
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dimensional and Goldman is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Small Cap and Goldman Sachs ActiveBeta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs ActiveBeta and Dimensional Small 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 Dimensional Small 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 ActiveBeta has no effect on the direction of Dimensional Small i.e., Dimensional Small and Goldman Sachs go up and down completely randomly.
Pair Corralation between Dimensional Small and Goldman Sachs
Given the investment horizon of 90 days Dimensional Small is expected to generate 1.12 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Dimensional Small Cap is 1.09 times less risky than Goldman Sachs. It trades about 0.08 of its potential returns per unit of risk. Goldman Sachs ActiveBeta is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 6,295 in Goldman Sachs ActiveBeta on August 25, 2024 and sell it today you would earn a total of 1,216 from holding Goldman Sachs ActiveBeta or generate 19.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Small Cap vs. Goldman Sachs ActiveBeta
Performance |
| Timeline |
| Dimensional Small Cap |
| Goldman Sachs ActiveBeta |
Dimensional Small and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Small and Goldman Sachs
The main advantage of trading using opposite Dimensional Small and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Small 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.| Dimensional Small vs. Invesco PureBeta MSCI | Dimensional Small vs. Aquagold International | Dimensional Small vs. Morningstar Unconstrained Allocation | Dimensional Small vs. High Yield Municipal Fund |
| Goldman Sachs vs. Invesco PureBeta MSCI | Goldman Sachs vs. Aquagold International | Goldman Sachs vs. Morningstar Unconstrained Allocation | Goldman Sachs vs. High Yield Municipal Fund |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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