Correlation Between Goldman Sachs and Financial Select
Can any of the company-specific risk be diversified away by investing in both Goldman Sachs and Financial Select 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 Goldman Sachs and Financial Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Goldman Sachs Future and Financial Select Sector, you can compare the effects of market volatilities on Goldman Sachs and Financial Select 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 Goldman Sachs with a short position of Financial Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and Financial Select.
Diversification Opportunities for Goldman Sachs and Financial Select
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Goldman and Financial is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Future and Financial Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Select Sector and Goldman Sachs 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 Goldman Sachs Future are associated (or correlated) with Financial Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Select Sector has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Financial Select go up and down completely randomly.
Pair Corralation between Goldman Sachs and Financial Select
Given the investment horizon of 90 days Goldman Sachs is expected to generate 2.12 times less return on investment than Financial Select. But when comparing it to its historical volatility, Goldman Sachs Future is 1.17 times less risky than Financial Select. It trades about 0.08 of its potential returns per unit of risk. Financial Select Sector is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 3,989 in Financial Select Sector on August 27, 2024 and sell it today you would earn a total of 1,084 from holding Financial Select Sector or generate 27.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goldman Sachs Future vs. Financial Select Sector
Performance |
| Timeline |
| Goldman Sachs Future |
| Financial Select Sector |
Goldman Sachs and Financial Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goldman Sachs and Financial Select
The main advantage of trading using opposite Goldman Sachs and Financial Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goldman Sachs position performs unexpectedly, Financial Select 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 Financial Select will offset losses from the drop in Financial Select's long position.| Goldman Sachs vs. Goldman Sachs ETF | Goldman Sachs vs. Goldman Sachs Future | Goldman Sachs vs. Goldman Sachs Future | Goldman Sachs vs. Goldman Sachs Future |
| Financial Select vs. Energy Select Sector | Financial Select vs. Technology Select Sector | Financial Select vs. Health Care Select | Financial Select vs. Industrial Select Sector |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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