Correlation Between FlexShares STOXX and Goldman Sachs

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

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

Diversification Opportunities for FlexShares STOXX and Goldman Sachs

0.83

Correlation Coefficient

FlexShares STOXX  Goldman Sachs

Very poor diversification

The 3 months correlation between FlexShares and Goldman is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares STOXX Global and Goldman Sachs ActiveBeta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs ActiveBeta and FlexShares STOXX 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 FlexShares STOXX Global 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 ActiveBeta has no effect on the direction of FlexShares STOXX i.e., FlexShares STOXX and Goldman Sachs go up and down completely randomly.

Pair Corralation between FlexShares STOXX and Goldman Sachs

Given the investment horizon of 90 days FlexShares STOXX Global is expected to generate 1.06 times more return on investment than Goldman Sachs. However, FlexShares STOXX is 1.06 times more volatile than Goldman Sachs ActiveBeta. It trades about 0.01 of its potential returns per unit of risk. Goldman Sachs ActiveBeta is currently generating about -0.01 per unit of risk. If you would invest  17,070  in FlexShares STOXX Global on October 20, 2024 and sell it today you would earn a total of  61.30  from holding FlexShares STOXX Global or generate 0.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

FlexShares STOXX Global  vs.  Goldman Sachs ActiveBeta

FlexShares STOXX Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FlexShares STOXX Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, FlexShares STOXX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Goldman Sachs ActiveBeta

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs ActiveBeta has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Goldman Sachs is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with FlexShares STOXX and Goldman Sachs

The main advantage of trading using opposite FlexShares STOXX and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares STOXX 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 FlexShares STOXX Global and Goldman Sachs ActiveBeta 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.