Correlation Between IShares Core and Goldman Sachs

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

Diversification Opportunities for IShares Core and Goldman Sachs

1.0

Correlation Coefficient

IShares Core  Goldman Sachs

No risk reduction

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

Pair Corralation between IShares Core and Goldman Sachs

Given the investment horizon of 90 days IShares Core is expected to generate 1.0 times less return on investment than Goldman Sachs. In addition to that, IShares Core is 1.05 times more volatile than Goldman Sachs MarketBeta. It trades about 0.24 of its total potential returns per unit of risk. Goldman Sachs MarketBeta is currently generating about 0.25 per unit of volatility. If you would invest  5,382  in Goldman Sachs MarketBeta on December 20, 2024 and sell it today you would earn a total of  681.00  from holding Goldman Sachs MarketBeta or generate 12.65% return on investment over 90 days.

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

iShares Core MSCI  vs.  Goldman Sachs MarketBeta

iShares Core MSCI

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core MSCI are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile technical and fundamental indicators, IShares Core sustained solid returns over the last few months and may actually be approaching a breakup point.

Goldman Sachs MarketBeta

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs MarketBeta are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, Goldman Sachs exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Core and Goldman Sachs

The main advantage of trading using opposite IShares Core and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 Core MSCI and Goldman Sachs MarketBeta 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.