Correlation Between SPDR Gold and Goldman Sachs

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

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

Diversification Opportunities for SPDR Gold and Goldman Sachs

1.0

Correlation Coefficient

SPDR Gold  Goldman Sachs

No risk reduction

The 3 months correlation between SPDR and Goldman is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Gold MiniShares and Goldman Sachs Physical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Physical and SPDR Gold 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 SPDR Gold MiniShares 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 Physical has no effect on the direction of SPDR Gold i.e., SPDR Gold and Goldman Sachs go up and down completely randomly.

Pair Corralation between SPDR Gold and Goldman Sachs

Given the investment horizon of 90 days SPDR Gold MiniShares is expected to generate 1.05 times more return on investment than Goldman Sachs. However, SPDR Gold is 1.05 times more volatile than Goldman Sachs Physical. It trades about 0.32 of its potential returns per unit of risk. Goldman Sachs Physical is currently generating about 0.33 per unit of risk. If you would invest  5,165  in SPDR Gold MiniShares on December 28, 2024 and sell it today you would earn a total of  891.00  from holding SPDR Gold MiniShares or generate 17.25% return on investment over 90 days.

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

SPDR Gold MiniShares  vs.  Goldman Sachs Physical

SPDR Gold MiniShares

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Gold MiniShares are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, SPDR Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Goldman Sachs Physical

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Physical are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR Gold and Goldman Sachs

The main advantage of trading using opposite SPDR Gold and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Gold 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 SPDR Gold MiniShares and Goldman Sachs Physical 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.