Correlation Between Goldman Sachs and SPDR Gold

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

By analyzing existing cross correlation between Goldman Sachs Physical and SPDR Gold MiniShares, you can compare the effects of market volatilities on Goldman Sachs and SPDR Gold 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 SPDR Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and SPDR Gold.

Diversification Opportunities for Goldman Sachs and SPDR Gold

1.0

Correlation Coefficient

Goldman Sachs  SPDR Gold

No risk reduction

The 3 months correlation between Goldman and SPDR is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Physical and SPDR Gold MiniShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Gold MiniShares 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 Physical are associated (or correlated) with SPDR Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Gold MiniShares has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and SPDR Gold go up and down completely randomly.

Pair Corralation between Goldman Sachs and SPDR Gold

Given the investment horizon of 90 days Goldman Sachs Physical is expected to generate 0.97 times more return on investment than SPDR Gold. However, Goldman Sachs Physical is 1.03 times less risky than SPDR Gold. It trades about 0.01 of its potential returns per unit of risk. SPDR Gold MiniShares is currently generating about 0.01 per unit of risk. If you would invest  2,713  in Goldman Sachs Physical on October 25, 2024 and sell it today you would earn a total of  13.00  from holding Goldman Sachs Physical or generate 0.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.33%
Values	Daily Returns

Goldman Sachs Physical  vs.  SPDR Gold MiniShares

Goldman Sachs Physical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Physical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Goldman Sachs is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR Gold MiniShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Gold MiniShares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, SPDR Gold is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Goldman Sachs and SPDR Gold

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

The idea behind Goldman Sachs Physical and SPDR Gold MiniShares 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.