Correlation Between Small Cap and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Equity and Goldman Sachs Mid, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Goldman Sachs.
Diversification Opportunities for Small Cap and Goldman Sachs
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Small and Goldman is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and Goldman Sachs Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Mid and Small Cap 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 Small Cap Equity 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 Mid has no effect on the direction of Small Cap i.e., Small Cap and Goldman Sachs go up and down completely randomly.
Pair Corralation between Small Cap and Goldman Sachs
Assuming the 90 days horizon Small Cap Equity is expected to generate 1.46 times more return on investment than Goldman Sachs. However, Small Cap is 1.46 times more volatile than Goldman Sachs Mid. It trades about 0.11 of its potential returns per unit of risk. Goldman Sachs Mid is currently generating about 0.14 per unit of risk. If you would invest 1,710 in Small Cap Equity on September 2, 2024 and sell it today you would earn a total of 321.00 from holding Small Cap Equity or generate 18.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Equity vs. Goldman Sachs Mid
Performance |
| Timeline |
| Small Cap Equity |
| Goldman Sachs Mid |
Small Cap and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Goldman Sachs
The main advantage of trading using opposite Small Cap and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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.| Small Cap vs. Growth Allocation Fund | Small Cap vs. Defensive Market Strategies | Small Cap vs. Defensive Market Strategies | Small Cap vs. Value Equity Institutional |
| Goldman Sachs vs. Goldman Sachs Clean | Goldman Sachs vs. Goldman Sachs Clean | Goldman Sachs vs. Goldman Sachs Clean | Goldman Sachs vs. Goldman Sachs Clean |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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