171.5 +3.56 (+2.08%) Sell

Don't go profit booking on GS now, it delivered a decent return

13 min read

GOLDMAN SACHS GROUP INC delivered stellar performance today. It gained +2.08% to close at 171.5. It's recent 5 day performance has been -2.76%, -1.79%, -0.44%, -0.06% and -1.14%.

[Themes containing GS]

GS showed a strong down trend over the last 3 months. During this period GS returned -27.2% and saw a maximum drawdown of -29.23%. There were 2 short signals during this period that returned a cumulative of +19.27% to investors.


GS has been underperforming the SP500 index in recent time, after having outperformed till 11 Jan, 2017. Over the last 2 years 11 months and 14 days, GS underperformed the SP500 index on 51% days.

GS returned losses on 64% days in the last three months. During this time, it delivered on average -0.48% per day. It delivered it's worst daily return of -7.46%, during this period, on Monday, 12 Nov, 2018. There was initially a bullish trend during this period which started on 29 Oct, 2018 and went on till 2 Nov, 2018. The bullish trend returned +7.92% to investors. This was followed by a bearish trend that started on 4 Dec, 2018 and ended on 17 Dec, 2018. This bearish trend lost -13.0% of investor capital.

On monthly basis, GS delivered losses in more months over the last year, than profits. GS delivered profits less regularly than SP500 index. GS was also a more risky investment than SP500 index as it's worst month in the last year, Nov 2018, returned -15.39% compared to -7.75% returned by SP500 index in Dec 2018. GS had a longer winning streak of losing months than SP500 index. It went down in 5 straight months (from Feb 2018 to Jun 2018) during which period it delivered -17.28%. It is interesting to note that both GS and SP500 index significantly outperform during months when quarterly/annual results are announced.

You must gain control over your money or the lack of it will forever control you.
-- Dave Ramsey

GS is becoming less volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant surge in GS's volatility from 2 Oct, 2018 to 14 Nov, 2018. While there was a significant surge in the SP500 index's volatility from 19 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that GS has significant positive skewness in it's return distribution. This indicates that investors can expect GS to recover from drawdowns quickly. Which makes GS a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

Investors trading in GS derivatives at this moment can consider 'Protective Collar' options strategy to receive better risk-adjusted returns.

GS has more chance of extreme outcomes than the SP500 index. Therefore, GS must receive a lower allocation than SP500 in your portfolio. SP500 index usually has shorter drawdown period than GS.

On a general note (since you are interested in GS), three mid cap instruments that deserve special mention are ABMD, EW and SQ. They have all outperformed the market and must be closely watched for investment opportunities.

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