Correlation Between Goldman Sachs and IShares Equity

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

By analyzing existing cross correlation between Goldman Sachs ActiveBeta and iShares Equity Factor, you can compare the effects of market volatilities on Goldman Sachs and IShares Equity 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 IShares Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and IShares Equity.

Diversification Opportunities for Goldman Sachs and IShares Equity

-0.6

Correlation Coefficient

Goldman Sachs  IShares Equity

Excellent diversification

The 3 months correlation between Goldman and IShares is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs ActiveBeta and iShares Equity Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Equity Factor 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 ActiveBeta are associated (or correlated) with IShares Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Equity Factor has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and IShares Equity go up and down completely randomly.

Pair Corralation between Goldman Sachs and IShares Equity

Considering the 90-day investment horizon Goldman Sachs is expected to generate 3.12 times less return on investment than IShares Equity. In addition to that, Goldman Sachs is 1.15 times more volatile than iShares Equity Factor. It trades about 0.04 of its total potential returns per unit of risk. iShares Equity Factor is currently generating about 0.14 per unit of volatility. If you would invest  3,955  in iShares Equity Factor on September 25, 2024 and sell it today you would earn a total of  2,168  from holding iShares Equity Factor or generate 54.82% return on investment over 90 days.

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

Goldman Sachs ActiveBeta  vs.  iShares Equity Factor

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 very healthy technical and fundamental indicators, Goldman Sachs is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

iShares Equity Factor

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Equity Factor are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, IShares Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Goldman Sachs and IShares Equity

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

The idea behind Goldman Sachs ActiveBeta and iShares Equity Factor 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.