Correlation Between IShares ESG and Goldman Sachs

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

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

Diversification Opportunities for IShares ESG and Goldman Sachs

0.99

Correlation Coefficient

IShares ESG  Goldman Sachs

No risk reduction

The 3 months correlation between IShares and Goldman is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and Goldman Sachs MarketBeta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs MarketBeta and IShares ESG 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 iShares ESG Aware 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 MarketBeta has no effect on the direction of IShares ESG i.e., IShares ESG and Goldman Sachs go up and down completely randomly.

Pair Corralation between IShares ESG and Goldman Sachs

Given the investment horizon of 90 days iShares ESG Aware is expected to under-perform the Goldman Sachs. In addition to that, IShares ESG is 1.03 times more volatile than Goldman Sachs MarketBeta. It trades about -0.08 of its total potential returns per unit of risk. Goldman Sachs MarketBeta is currently generating about -0.07 per unit of volatility. If you would invest  5,125  in Goldman Sachs MarketBeta on December 20, 2024 and sell it today you would lose (215.00) from holding Goldman Sachs MarketBeta or give up 4.2% of portfolio value over 90 days.

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

iShares ESG Aware  vs.  Goldman Sachs MarketBeta

iShares ESG Aware

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares ESG Aware has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, IShares ESG is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Goldman Sachs MarketBeta

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goldman Sachs MarketBeta 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares ESG and Goldman Sachs

The main advantage of trading using opposite IShares ESG and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG 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 iShares ESG Aware and Goldman Sachs MarketBeta 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.