Correlation Between Charles Schwab and Goldman Sachs

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

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

Diversification Opportunities for Charles Schwab and Goldman Sachs

0.92

Correlation Coefficient

Charles Schwab  Goldman Sachs

Almost no diversification

The 3 months correlation between Charles and Goldman is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Charles Schwab Corp 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 Charles Schwab 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 Charles Schwab Corp 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 Charles Schwab i.e., Charles Schwab and Goldman Sachs go up and down completely randomly.

Pair Corralation between Charles Schwab and Goldman Sachs

Given the investment horizon of 90 days Charles Schwab is expected to generate 1.5 times less return on investment than Goldman Sachs. In addition to that, Charles Schwab is 1.44 times more volatile than Goldman Sachs Group. It trades about 0.03 of its total potential returns per unit of risk. Goldman Sachs Group is currently generating about 0.07 per unit of volatility. If you would invest  26,814  in Goldman Sachs Group on February 4, 2024 and sell it today you would earn a total of  17,004  from holding Goldman Sachs Group or generate 63.41% return on investment over 90 days.

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

Charles Schwab Corp  vs.  Goldman Sachs Group

Charles Schwab Corp

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Charles Schwab Corp are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical indicators, Charles Schwab showed solid returns over the last few months and may actually be approaching a breakup point.

Goldman Sachs Group

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Group are ranked lower than 13 (%) 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.

Pair Trading with Charles Schwab and Goldman Sachs

The main advantage of trading using opposite Charles Schwab and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charles Schwab 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 Charles Schwab Corp and Goldman Sachs 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.