Correlation Between Small Capitalization and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Small Capitalization 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 Small Capitalization and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Capitalization Portfolio and Goldman Sachs Flexible, you can compare the effects of market volatilities on Small Capitalization 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 Small Capitalization with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Capitalization and Goldman Sachs.
Diversification Opportunities for Small Capitalization and Goldman Sachs
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small and Goldman is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Small Capitalization Portfolio and Goldman Sachs Flexible in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Flexible and Small Capitalization 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 Small Capitalization Portfolio 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 Flexible has no effect on the direction of Small Capitalization i.e., Small Capitalization and Goldman Sachs go up and down completely randomly.
Pair Corralation between Small Capitalization and Goldman Sachs
Assuming the 90 days horizon Small Capitalization Portfolio is expected to generate 1.7 times more return on investment than Goldman Sachs. However, Small Capitalization is 1.7 times more volatile than Goldman Sachs Flexible. It trades about 0.17 of its potential returns per unit of risk. Goldman Sachs Flexible is currently generating about 0.17 per unit of risk. If you would invest 679.00 in Small Capitalization Portfolio on June 7, 2025 and sell it today you would earn a total of 76.00 from holding Small Capitalization Portfolio or generate 11.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Capitalization Portfolio vs. Goldman Sachs Flexible
Performance |
| Timeline |
| Small Capitalization |
| Goldman Sachs Flexible |
Small Capitalization and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Capitalization and Goldman Sachs
The main advantage of trading using opposite Small Capitalization and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Capitalization 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.| Small Capitalization vs. Janus High Yield Fund | Small Capitalization vs. Multi Manager High Yield | Small Capitalization vs. Payden High Income | Small Capitalization vs. Mainstay High Yield |
| Goldman Sachs vs. Financial Services Portfolio | Goldman Sachs vs. Financial Industries Fund | Goldman Sachs vs. Vanguard Financials Index | Goldman Sachs vs. Financials Ultrasector Profund |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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