Correlation Between Goldman Sachs and Basic Materials

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

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

Diversification Opportunities for Goldman Sachs and Basic Materials

0.66

Correlation Coefficient

Goldman Sachs  Basic Materials

Poor diversification

The 3 months correlation between GOLDMAN and Basic is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Government and Basic Materials Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials and Goldman Sachs 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 Goldman Sachs Government are associated (or correlated) with Basic Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Materials has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Basic Materials go up and down completely randomly.

Pair Corralation between Goldman Sachs and Basic Materials

Assuming the 90 days horizon Goldman Sachs is expected to generate 3.86 times less return on investment than Basic Materials. But when comparing it to its historical volatility, Goldman Sachs Government is 3.25 times less risky than Basic Materials. It trades about 0.11 of its potential returns per unit of risk. Basic Materials Fund is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  6,665  in Basic Materials Fund on May 13, 2025 and sell it today you would earn a total of  547.00  from holding Basic Materials Fund or generate 8.21% return on investment over 90 days.

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

Goldman Sachs Government  vs.  Basic Materials Fund

Goldman Sachs Government

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Government are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Basic Materials

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Basic Materials Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Basic Materials may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Goldman Sachs and Basic Materials

The main advantage of trading using opposite Goldman Sachs and Basic Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goldman Sachs position performs unexpectedly, Basic Materials 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 Basic Materials will offset losses from the drop in Basic Materials' long position.

The idea behind Goldman Sachs Government and Basic Materials Fund 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.