Correlation Between IShares Interest and Goldman Sachs

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

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

Diversification Opportunities for IShares Interest and Goldman Sachs

0.49

Correlation Coefficient

IShares Interest  Goldman Sachs

Very weak diversification

The 3 months correlation between IShares and Goldman is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding iShares Interest Rate and Goldman Sachs ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs ETF and IShares Interest 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 iShares Interest Rate 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 ETF has no effect on the direction of IShares Interest i.e., IShares Interest and Goldman Sachs go up and down completely randomly.

Pair Corralation between IShares Interest and Goldman Sachs

Given the investment horizon of 90 days iShares Interest Rate is expected to generate 1.38 times more return on investment than Goldman Sachs. However, IShares Interest is 1.38 times more volatile than Goldman Sachs ETF. It trades about 0.01 of its potential returns per unit of risk. Goldman Sachs ETF is currently generating about -0.01 per unit of risk. If you would invest  8,515  in iShares Interest Rate on December 29, 2024 and sell it today you would earn a total of  12.00  from holding iShares Interest Rate or generate 0.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

iShares Interest Rate  vs.  Goldman Sachs ETF

iShares Interest Rate

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Interest Rate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, IShares Interest is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Goldman Sachs ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goldman Sachs ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Interest and Goldman Sachs

The main advantage of trading using opposite IShares Interest and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Interest 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 iShares Interest Rate and Goldman Sachs ETF 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.