Correlation Between Associated Capital and Goldman Sachs

Can any of the company-specific risk be diversified away by investing in both Associated Capital 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 Associated Capital and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Associated Capital Group and Goldman Sachs Group, you can compare the effects of market volatilities on Associated Capital 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 Associated Capital with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated Capital and Goldman Sachs.

Diversification Opportunities for Associated Capital and Goldman Sachs

0.23

Correlation Coefficient

Associated Capital  Goldman Sachs

Modest diversification

The 3 months correlation between Associated and Goldman is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Associated Capital Group and Goldman Sachs Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Group and Associated Capital 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 Associated Capital Group 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 Group has no effect on the direction of Associated Capital i.e., Associated Capital and Goldman Sachs go up and down completely randomly.

Pair Corralation between Associated Capital and Goldman Sachs

Allowing for the 90-day total investment horizon Associated Capital is expected to generate 4.12 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Associated Capital Group is 1.16 times less risky than Goldman Sachs. It trades about 0.06 of its potential returns per unit of risk. Goldman Sachs Group is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  39,318  in Goldman Sachs Group on February 28, 2024 and sell it today you would earn a total of  6,800  from holding Goldman Sachs Group or generate 17.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Associated Capital Group  vs.  Goldman Sachs Group

Associated Capital

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Capital Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Associated Capital is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Goldman Sachs Group

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Associated Capital and Goldman Sachs

The main advantage of trading using opposite Associated Capital and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated Capital 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.

The idea behind Associated Capital Group and Goldman Sachs Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..