Correlation Between VanEck Fallen and Goldman Sachs

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

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

Diversification Opportunities for VanEck Fallen and Goldman Sachs

0.85

Correlation Coefficient

VanEck Fallen  Goldman Sachs

Very poor diversification

The 3 months correlation between VanEck and Goldman is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Fallen Angel and Goldman Sachs Access in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Access and VanEck Fallen 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 VanEck Fallen Angel 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 Access has no effect on the direction of VanEck Fallen i.e., VanEck Fallen and Goldman Sachs go up and down completely randomly.

Pair Corralation between VanEck Fallen and Goldman Sachs

Given the investment horizon of 90 days VanEck Fallen is expected to generate 1.07 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, VanEck Fallen Angel is 1.07 times less risky than Goldman Sachs. It trades about 0.09 of its potential returns per unit of risk. Goldman Sachs Access is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,743  in Goldman Sachs Access on September 26, 2024 and sell it today you would earn a total of  731.00  from holding Goldman Sachs Access or generate 19.53% return on investment over 90 days.

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

VanEck Fallen Angel  vs.  Goldman Sachs Access

VanEck Fallen Angel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Fallen Angel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, VanEck Fallen is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Goldman Sachs Access

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Access has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with VanEck Fallen and Goldman Sachs

The main advantage of trading using opposite VanEck Fallen and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Fallen 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 VanEck Fallen Angel and Goldman Sachs Access 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.