Correlation Between GM and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and The Goldman Sachs, you can compare the effects of market volatilities on GM 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 GM with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Goldman Sachs.
Diversification Opportunities for GM and Goldman Sachs
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between GM and Goldman is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and The Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs and GM 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 General Motors 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 GM i.e., GM and Goldman Sachs go up and down completely randomly.
Pair Corralation between GM and Goldman Sachs
Allowing for the 90-day total investment horizon GM is expected to generate 1.81 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, General Motors is 1.33 times less risky than Goldman Sachs. It trades about 0.17 of its potential returns per unit of risk. The Goldman Sachs is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 48,080 in The Goldman Sachs on September 1, 2024 and sell it today you would earn a total of 9,560 from holding The Goldman Sachs or generate 19.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 91.3% |
| Values | Daily Returns |
General Motors vs. The Goldman Sachs
Performance |
| Timeline |
| General Motors |
| Goldman Sachs |
GM and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Goldman Sachs
The main advantage of trading using opposite GM and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors and The Goldman Sachs 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.| Goldman Sachs vs. IDP EDUCATION LTD | Goldman Sachs vs. Grand Canyon Education | Goldman Sachs vs. FORMPIPE SOFTWARE AB | Goldman Sachs vs. ASURE SOFTWARE |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins |