Correlation Between Meta Platforms and Goldman Sachs

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

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

Diversification Opportunities for Meta Platforms and Goldman Sachs

0.15

Correlation Coefficient

Meta Platforms  Goldman Sachs

Average diversification

The 3 months correlation between Meta and Goldman is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Goldman Sachs Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Strategic and Meta Platforms 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 Meta Platforms 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 Strategic has no effect on the direction of Meta Platforms i.e., Meta Platforms and Goldman Sachs go up and down completely randomly.

Pair Corralation between Meta Platforms and Goldman Sachs

Allowing for the 90-day total investment horizon Meta Platforms is expected to under-perform the Goldman Sachs. In addition to that, Meta Platforms is 13.58 times more volatile than Goldman Sachs Strategic. It trades about -0.13 of its total potential returns per unit of risk. Goldman Sachs Strategic is currently generating about 0.03 per unit of volatility. If you would invest  926.00  in Goldman Sachs Strategic on January 26, 2024 and sell it today you would earn a total of  35.00  from holding Goldman Sachs Strategic or generate 3.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	7.29%
Values	Daily Returns

Meta Platforms  vs.  Goldman Sachs Strategic

Meta Platforms

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Meta Platforms has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Meta Platforms is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Strategic has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Meta Platforms and Goldman Sachs

The main advantage of trading using opposite Meta Platforms and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms 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 Meta Platforms and Goldman Sachs Strategic 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.