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 Growth and Goldman Sachs High, 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
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Small and Goldman is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth and Goldman Sachs High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs High 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 Growth 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 High 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 Growth is expected to generate 11.33 times more return on investment than Goldman Sachs. However, Small Cap is 11.33 times more volatile than Goldman Sachs High. It trades about 0.16 of its potential returns per unit of risk. Goldman Sachs High is currently generating about 0.19 per unit of risk. If you would invest 1,667 in Small Cap Growth on September 2, 2024 and sell it today you would earn a total of 209.00 from holding Small Cap Growth or generate 12.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Growth vs. Goldman Sachs High
Performance |
| Timeline |
| Small Cap Growth |
| Goldman Sachs High |
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. Regional Bank Fund | Small Cap vs. Regional Bank Fund | Small Cap vs. Multimanager Lifestyle Moderate | Small Cap vs. Multimanager Lifestyle Balanced |
| 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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