Correlation Between Us Government and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Us Government 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 Us Government and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Us Government Securities and Goldman Sachs Government, you can compare the effects of market volatilities on Us Government 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 Us Government with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and Goldman Sachs.
Diversification Opportunities for Us Government and Goldman Sachs
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between USGFX and GOLDMAN is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities and Goldman Sachs Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Government and Us Government 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 Us Government Securities 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 Government has no effect on the direction of Us Government i.e., Us Government and Goldman Sachs go up and down completely randomly.
Pair Corralation between Us Government and Goldman Sachs
Assuming the 90 days horizon Us Government Securities is expected to under-perform the Goldman Sachs. But the mutual fund apears to be less risky and, when comparing its historical volatility, Us Government Securities is 1.04 times less risky than Goldman Sachs. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Goldman Sachs Government is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 1,317 in Goldman Sachs Government on September 2, 2024 and sell it today you would lose (17.00) from holding Goldman Sachs Government or give up 1.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Us Government Securities vs. Goldman Sachs Government
Performance |
| Timeline |
| Us Government Securities |
| Goldman Sachs Government |
Us Government and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Government and Goldman Sachs
The main advantage of trading using opposite Us Government and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government 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.| Us Government vs. Small Cap Stock | Us Government vs. Sentinel Small Pany | Us Government vs. Aqr Diversified Arbitrage | Us Government vs. Lord Abbett Diversified |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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