Correlation Between MicroSectors FANG and Goldman Sachs

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

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

Diversification Opportunities for MicroSectors FANG and Goldman Sachs

0.96

Correlation Coefficient

MicroSectors FANG  Goldman Sachs

Almost no diversification

The 3 months correlation between MicroSectors and Goldman is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG ETN 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 MicroSectors FANG 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 MicroSectors FANG ETN 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 MicroSectors FANG i.e., MicroSectors FANG and Goldman Sachs go up and down completely randomly.

Pair Corralation between MicroSectors FANG and Goldman Sachs

Given the investment horizon of 90 days MicroSectors FANG ETN is expected to under-perform the Goldman Sachs. In addition to that, MicroSectors FANG is 1.92 times more volatile than Goldman Sachs MarketBeta. It trades about -0.11 of its total potential returns per unit of risk. Goldman Sachs MarketBeta is currently generating about -0.09 per unit of volatility. If you would invest  5,164  in Goldman Sachs MarketBeta on December 21, 2024 and sell it today you would lose (264.00) from holding Goldman Sachs MarketBeta or give up 5.11% of portfolio value over 90 days.

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

MicroSectors FANG ETN  vs.  Goldman Sachs MarketBeta

MicroSectors FANG ETN

Risk-Adjusted Performance

Very Weak

Over the last 90 days MicroSectors FANG ETN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund 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 MicroSectors FANG and Goldman Sachs

The main advantage of trading using opposite MicroSectors FANG and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG 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 MicroSectors FANG ETN 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.