Correlation Between Goldman Sachs and IShares Gold

Can any of the company-specific risk be diversified away by investing in both Goldman Sachs and IShares 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 IShares 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 iShares Gold Trust, you can compare the effects of market volatilities on Goldman Sachs and IShares 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 IShares Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and IShares Gold.

Diversification Opportunities for Goldman Sachs and IShares Gold

1.0

Correlation Coefficient

Goldman Sachs  IShares Gold

No risk reduction

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

Pair Corralation between Goldman Sachs and IShares Gold

Given the investment horizon of 90 days Goldman Sachs Physical is expected to generate 1.03 times more return on investment than IShares Gold. However, Goldman Sachs is 1.03 times more volatile than iShares Gold Trust. It trades about 0.35 of its potential returns per unit of risk. iShares Gold Trust is currently generating about 0.35 per unit of risk. If you would invest  2,577  in Goldman Sachs Physical on December 29, 2024 and sell it today you would earn a total of  468.00  from holding Goldman Sachs Physical or generate 18.16% return on investment over 90 days.

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

Goldman Sachs Physical  vs.  iShares Gold Trust

Goldman Sachs Physical

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Physical are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

iShares Gold Trust

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Gold Trust are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, IShares Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goldman Sachs and IShares Gold

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

The idea behind Goldman Sachs Physical and iShares Gold Trust 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.