Correlation Between Goldman Sachs and Affiliated Managers

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

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

Diversification Opportunities for Goldman Sachs and Affiliated Managers

0.66

Correlation Coefficient

Goldman Sachs  Affiliated Managers

Poor diversification

The 3 months correlation between Goldman and Affiliated is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Group and Affiliated Managers Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affiliated Managers and Goldman Sachs 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 Goldman Sachs Group are associated (or correlated) with Affiliated Managers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affiliated Managers has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Affiliated Managers go up and down completely randomly.

Pair Corralation between Goldman Sachs and Affiliated Managers

Allowing for the 90-day total investment horizon Goldman Sachs Group is expected to generate 1.39 times more return on investment than Affiliated Managers. However, Goldman Sachs is 1.39 times more volatile than Affiliated Managers Group. It trades about 0.14 of its potential returns per unit of risk. Affiliated Managers Group is currently generating about -0.17 per unit of risk. If you would invest  41,351  in Goldman Sachs Group on January 31, 2024 and sell it today you would earn a total of  1,730  from holding Goldman Sachs Group or generate 4.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Goldman Sachs Group  vs.  Affiliated Managers Group

Goldman Sachs Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Affiliated Managers

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Affiliated Managers Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Affiliated Managers may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Goldman Sachs and Affiliated Managers

The main advantage of trading using opposite Goldman Sachs and Affiliated Managers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goldman Sachs position performs unexpectedly, Affiliated Managers 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 Affiliated Managers will offset losses from the drop in Affiliated Managers' long position.

The idea behind Goldman Sachs Group and Affiliated Managers 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.

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.