Correlation Between Capital World and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Capital World 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 Capital World and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital World Growth and Goldman Sachs Large, you can compare the effects of market volatilities on Capital World 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 Capital World with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Goldman Sachs.
Diversification Opportunities for Capital World and Goldman Sachs
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and GOLDMAN is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Growth and Goldman Sachs Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Large and Capital World 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 Capital World 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 Large has no effect on the direction of Capital World i.e., Capital World and Goldman Sachs go up and down completely randomly.
Pair Corralation between Capital World and Goldman Sachs
Assuming the 90 days horizon Capital World is expected to generate 2.38 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Capital World Growth is 1.51 times less risky than Goldman Sachs. It trades about 0.11 of its potential returns per unit of risk. Goldman Sachs Large is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 3,332 in Goldman Sachs Large on September 2, 2024 and sell it today you would earn a total of 370.00 from holding Goldman Sachs Large or generate 11.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital World Growth vs. Goldman Sachs Large
Performance |
| Timeline |
| Capital World Growth |
| Goldman Sachs Large |
Capital World and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital World and Goldman Sachs
The main advantage of trading using opposite Capital World and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital World 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.| Capital World vs. Income Fund Of | Capital World vs. New World Fund | Capital World vs. American Mutual Fund | Capital World vs. American Mutual Fund |
| 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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