Correlation Between Goldman Sachs and Xtrackers California

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

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

Diversification Opportunities for Goldman Sachs and Xtrackers California

0.65

Correlation Coefficient

Goldman Sachs  Xtrackers California

Poor diversification

The 3 months correlation between Goldman and Xtrackers is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs ETF and Xtrackers California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers California and Goldman Sachs 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 Goldman Sachs ETF are associated (or correlated) with Xtrackers California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers California has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Xtrackers California go up and down completely randomly.

Pair Corralation between Goldman Sachs and Xtrackers California

Given the investment horizon of 90 days Goldman Sachs ETF is expected to generate 0.89 times more return on investment than Xtrackers California. However, Goldman Sachs ETF is 1.12 times less risky than Xtrackers California. It trades about 0.1 of its potential returns per unit of risk. Xtrackers California Municipal is currently generating about 0.01 per unit of risk. If you would invest  4,976  in Goldman Sachs ETF on December 21, 2024 and sell it today you would earn a total of  67.00  from holding Goldman Sachs ETF or generate 1.35% return on investment over 90 days.

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

Goldman Sachs ETF  vs.  Xtrackers California Municipal

Goldman Sachs ETF

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs ETF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Xtrackers California

Risk-Adjusted Performance

Weak

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

Pair Trading with Goldman Sachs and Xtrackers California

The main advantage of trading using opposite Goldman Sachs and Xtrackers California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goldman Sachs position performs unexpectedly, Xtrackers California 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 Xtrackers California will offset losses from the drop in Xtrackers California's long position.

The idea behind Goldman Sachs ETF and Xtrackers California Municipal 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..