Correlation Between Goldman Sachs and MSCI

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

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

Diversification Opportunities for Goldman Sachs and MSCI

-0.4

Correlation Coefficient

Goldman Sachs  MSCI

Very good diversification

The 3 months correlation between Goldman and MSCI is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding The Goldman Sachs and MSCI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSCI Inc 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 The Goldman Sachs are associated (or correlated) with MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSCI Inc has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and MSCI go up and down completely randomly.

Pair Corralation between Goldman Sachs and MSCI

Assuming the 90 days horizon The Goldman Sachs is expected to generate 1.06 times more return on investment than MSCI. However, Goldman Sachs is 1.06 times more volatile than MSCI Inc. It trades about -0.08 of its potential returns per unit of risk. MSCI Inc is currently generating about -0.22 per unit of risk. If you would invest  60,260  in The Goldman Sachs on November 28, 2024 and sell it today you would lose (1,830) from holding The Goldman Sachs or give up 3.04% of portfolio value over 90 days.

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

The Goldman Sachs  vs.  MSCI Inc

Goldman Sachs

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Goldman Sachs are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Goldman Sachs is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

MSCI Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days MSCI Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, MSCI 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 MSCI

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

The idea behind The Goldman Sachs and MSCI Inc 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.