Correlation Between Vanguard Total and Goldman Sachs

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

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

Diversification Opportunities for Vanguard Total and Goldman Sachs

-0.01

Correlation Coefficient

Vanguard Total  Goldman Sachs

Good diversification

The 3 months correlation between Vanguard and Goldman is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and Goldman Sachs Hedge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Hedge and Vanguard Total 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 Vanguard Total Bond 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 Hedge has no effect on the direction of Vanguard Total i.e., Vanguard Total and Goldman Sachs go up and down completely randomly.

Pair Corralation between Vanguard Total and Goldman Sachs

Considering the 90-day investment horizon Vanguard Total Bond is expected to under-perform the Goldman Sachs. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Total Bond is 3.2 times less risky than Goldman Sachs. The etf trades about -0.03 of its potential returns per unit of risk. The Goldman Sachs Hedge is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  12,124  in Goldman Sachs Hedge on October 24, 2024 and sell it today you would earn a total of  936.26  from holding Goldman Sachs Hedge or generate 7.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Vanguard Total Bond  vs.  Goldman Sachs Hedge

Vanguard Total Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Total Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vanguard Total is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Goldman Sachs Hedge

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Hedge are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, Goldman Sachs may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Vanguard Total and Goldman Sachs

The main advantage of trading using opposite Vanguard Total and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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 Vanguard Total Bond and Goldman Sachs Hedge 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.