Correlation Between Wasatch Small and Goldman Sachs

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

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

Diversification Opportunities for Wasatch Small and Goldman Sachs

0.83

Correlation Coefficient

Wasatch Small  Goldman Sachs

Very poor diversification

The 3 months correlation between Wasatch and Goldman is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Small Cap and Goldman Sachs Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Small and Wasatch Small 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 Wasatch Small Cap 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 Small has no effect on the direction of Wasatch Small i.e., Wasatch Small and Goldman Sachs go up and down completely randomly.

Pair Corralation between Wasatch Small and Goldman Sachs

Assuming the 90 days horizon Wasatch Small Cap is expected to under-perform the Goldman Sachs. But the mutual fund apears to be less risky and, when comparing its historical volatility, Wasatch Small Cap is 1.04 times less risky than Goldman Sachs. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Goldman Sachs Small is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,858  in Goldman Sachs Small on February 5, 2024 and sell it today you would lose (4.00) from holding Goldman Sachs Small or give up 0.1% of portfolio value over 90 days.

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

Wasatch Small Cap  vs.  Goldman Sachs Small

Wasatch Small Cap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Small Cap are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Wasatch Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs Small

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Small are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Goldman Sachs may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Wasatch Small and Goldman Sachs

The main advantage of trading using opposite Wasatch Small and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wasatch Small 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 Wasatch Small Cap and Goldman Sachs Small 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.