Correlation Between Goldman Sachs and Prospect Capital
Can any of the company-specific risk be diversified away by investing in both Goldman Sachs and Prospect Capital 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 Prospect Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Goldman Sachs Group and Prospect Capital, you can compare the effects of market volatilities on Goldman Sachs and Prospect Capital 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 Prospect Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and Prospect Capital.
Diversification Opportunities for Goldman Sachs and Prospect Capital
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Goldman and Prospect is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Group and Prospect Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospect Capital 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 Group are associated (or correlated) with Prospect Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prospect Capital has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Prospect Capital go up and down completely randomly.
Pair Corralation between Goldman Sachs and Prospect Capital
Allowing for the 90-day total investment horizon Goldman Sachs Group is expected to generate 0.87 times more return on investment than Prospect Capital. However, Goldman Sachs Group is 1.15 times less risky than Prospect Capital. It trades about 0.23 of its potential returns per unit of risk. Prospect Capital is currently generating about -0.1 per unit of risk. If you would invest 52,358 in Goldman Sachs Group on August 27, 2024 and sell it today you would earn a total of 7,920 from holding Goldman Sachs Group or generate 15.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goldman Sachs Group vs. Prospect Capital
Performance |
| Timeline |
| Goldman Sachs Group |
| Prospect Capital |
Goldman Sachs and Prospect Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goldman Sachs and Prospect Capital
The main advantage of trading using opposite Goldman Sachs and Prospect Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goldman Sachs position performs unexpectedly, Prospect Capital 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 Prospect Capital will offset losses from the drop in Prospect Capital's long position.| Goldman Sachs vs. Morgan Stanley | Goldman Sachs vs. JPMorgan Chase Co | Goldman Sachs vs. Wells Fargo | Goldman Sachs vs. Citigroup |
| Prospect Capital vs. Gladstone Capital | Prospect Capital vs. Horizon Technology Finance | Prospect Capital vs. Gladstone Investment | Prospect Capital vs. Stellus Capital Investment |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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