Correlation Between Goldman Sachs and IShares MSCI

Can any of the company-specific risk be diversified away by investing in both Goldman Sachs and IShares MSCI 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 MSCI 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 MSCI ACWI, you can compare the effects of market volatilities on Goldman Sachs and IShares MSCI 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 MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and IShares MSCI.

Diversification Opportunities for Goldman Sachs and IShares MSCI

0.58

Correlation Coefficient

Goldman Sachs  IShares MSCI

Very weak diversification

The 3 months correlation between Goldman and IShares is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs ActiveBeta and iShares MSCI ACWI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI ACWI 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI ACWI has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and IShares MSCI go up and down completely randomly.

Pair Corralation between Goldman Sachs and IShares MSCI

Given the investment horizon of 90 days Goldman Sachs ActiveBeta is expected to generate 0.74 times more return on investment than IShares MSCI. However, Goldman Sachs ActiveBeta is 1.36 times less risky than IShares MSCI. It trades about 0.1 of its potential returns per unit of risk. iShares MSCI ACWI is currently generating about -0.03 per unit of risk. If you would invest  4,930  in Goldman Sachs ActiveBeta on December 29, 2024 and sell it today you would earn a total of  200.00  from holding Goldman Sachs ActiveBeta or generate 4.06% return on investment over 90 days.

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

Goldman Sachs ActiveBeta  vs.  iShares MSCI ACWI

Goldman Sachs ActiveBeta

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs ActiveBeta are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Goldman Sachs is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares MSCI ACWI

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares MSCI ACWI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, IShares MSCI is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Goldman Sachs and IShares MSCI

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

The idea behind Goldman Sachs ActiveBeta and iShares MSCI ACWI 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.