Correlation Between 3M and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both 3M 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 3M and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and Goldman Sachs Access, you can compare the effects of market volatilities on 3M 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 3M with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Goldman Sachs.
Diversification Opportunities for 3M and Goldman Sachs
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 3M and Goldman is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Goldman Sachs Access in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Access and 3M 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 3M Company 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 Access has no effect on the direction of 3M i.e., 3M and Goldman Sachs go up and down completely randomly.
Pair Corralation between 3M and Goldman Sachs
Considering the 90-day investment horizon 3M Company is expected to generate 11.43 times more return on investment than Goldman Sachs. However, 3M is 11.43 times more volatile than Goldman Sachs Access. It trades about 0.2 of its potential returns per unit of risk. Goldman Sachs Access is currently generating about 0.2 per unit of risk. If you would invest 12,518 in 3M Company on September 3, 2024 and sell it today you would earn a total of 835.00 from holding 3M Company or generate 6.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
3M Company vs. Goldman Sachs Access
Performance |
| Timeline |
| 3M Company |
| Goldman Sachs Access |
3M and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and Goldman Sachs
The main advantage of trading using opposite 3M and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M 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.| 3M vs. MDU Resources Group | 3M vs. Valmont Industries | 3M vs. Griffon | 3M vs. Compass Diversified Holdings |
| Goldman Sachs vs. Great Southern Bancorp | Goldman Sachs vs. Grayscale Solana Trust | Goldman Sachs vs. GSI Technology | Goldman Sachs vs. Hurco Companies |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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