Correlation Between State Street and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both State Street 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 State Street and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Target and Goldman Sachs Clean, you can compare the effects of market volatilities on State Street 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 State Street with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Goldman Sachs.
Diversification Opportunities for State Street and Goldman Sachs
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between State and Goldman is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding State Street Target and Goldman Sachs Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Clean and State Street 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 State Street Target 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 Clean has no effect on the direction of State Street i.e., State Street and Goldman Sachs go up and down completely randomly.
Pair Corralation between State Street and Goldman Sachs
Assuming the 90 days horizon State Street Target is expected to generate 0.59 times more return on investment than Goldman Sachs. However, State Street Target is 1.7 times less risky than Goldman Sachs. It trades about 0.09 of its potential returns per unit of risk. Goldman Sachs Clean is currently generating about -0.04 per unit of risk. If you would invest 1,213 in State Street Target on September 4, 2024 and sell it today you would earn a total of 418.00 from holding State Street Target or generate 34.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
State Street Target vs. Goldman Sachs Clean
Performance |
| Timeline |
| State Street Target |
| Goldman Sachs Clean |
State Street and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Goldman Sachs
The main advantage of trading using opposite State Street and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street 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.| State Street vs. State Street Target | State Street vs. State Street Target | State Street vs. State Street Target | State Street vs. State Street Target |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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