Correlation Between Bank of America and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Bank of America 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 Bank of America and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Goldman Sachs Group, you can compare the effects of market volatilities on Bank of America 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 Bank of America with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Goldman Sachs.
Diversification Opportunities for Bank of America and Goldman Sachs
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Goldman is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America 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 Bank of America 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 Bank of America 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 Bank of America i.e., Bank of America and Goldman Sachs go up and down completely randomly.
Pair Corralation between Bank of America and Goldman Sachs
Considering the 90-day investment horizon Bank of America is expected to generate 3.7 times less return on investment than Goldman Sachs. In addition to that, Bank of America is 1.09 times more volatile than Goldman Sachs Group. It trades about 0.01 of its total potential returns per unit of risk. Goldman Sachs Group is currently generating about 0.04 per unit of volatility. If you would invest 31,019 in Goldman Sachs Group on January 20, 2024 and sell it today you would earn a total of 9,292 from holding Goldman Sachs Group or generate 29.96% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Bank of America vs. Goldman Sachs Group
Performance |
Timeline |
Bank of America |
Goldman Sachs Group |
Bank of America and Goldman Sachs Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bank of America and Goldman Sachs
The main advantage of trading using opposite Bank of America and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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.Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of |
Goldman Sachs vs. JPMorgan Chase Co | Goldman Sachs vs. Wells Fargo | Goldman Sachs vs. Citigroup | Goldman Sachs vs. American Express |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
Other Complementary Tools
Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |