Correlation Between Goldman Sachs and Sound Point
Can any of the company-specific risk be diversified away by investing in both Goldman Sachs and Sound Point 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 Sound Point 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 Sound Point Meridian, you can compare the effects of market volatilities on Goldman Sachs and Sound Point 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 Sound Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and Sound Point.
Diversification Opportunities for Goldman Sachs and Sound Point
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Goldman and Sound is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Group and Sound Point Meridian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sound Point Meridian 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 Sound Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sound Point Meridian has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Sound Point go up and down completely randomly.
Pair Corralation between Goldman Sachs and Sound Point
Allowing for the 90-day total investment horizon Goldman Sachs Group is expected to generate 1.64 times more return on investment than Sound Point. However, Goldman Sachs is 1.64 times more volatile than Sound Point Meridian. It trades about 0.23 of its potential returns per unit of risk. Sound Point Meridian is currently generating about 0.22 per unit of risk. If you would invest 52,440 in Goldman Sachs Group on August 31, 2024 and sell it today you would earn a total of 8,103 from holding Goldman Sachs Group or generate 15.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goldman Sachs Group vs. Sound Point Meridian
Performance |
| Timeline |
| Goldman Sachs Group |
| Sound Point Meridian |
Goldman Sachs and Sound Point Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goldman Sachs and Sound Point
The main advantage of trading using opposite Goldman Sachs and Sound Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goldman Sachs position performs unexpectedly, Sound Point 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 Sound Point will offset losses from the drop in Sound Point's long position.| Goldman Sachs vs. Morgan Stanley | Goldman Sachs vs. JPMorgan Chase Co | Goldman Sachs vs. Wells Fargo | Goldman Sachs vs. Citigroup |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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