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 ActiveBeta, 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

0.99

Correlation Coefficient

IShares Core  Goldman Sachs

No risk reduction

The 3 months correlation between IShares and Goldman is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and Goldman Sachs ActiveBeta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs ActiveBeta 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 ActiveBeta 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 MSCI is expected to under-perform the Goldman Sachs. In addition to that, IShares Core is 1.1 times more volatile than Goldman Sachs ActiveBeta. It trades about -0.05 of its total potential returns per unit of risk. Goldman Sachs ActiveBeta is currently generating about -0.03 per unit of volatility. If you would invest  3,517  in Goldman Sachs ActiveBeta on September 2, 2024 and sell it today you would lose (56.00) from holding Goldman Sachs ActiveBeta or give up 1.59% of portfolio value 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 ActiveBeta

iShares Core MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

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

Goldman Sachs ActiveBeta

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs ActiveBeta has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 ActiveBeta 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 Global Correlations module to find global opportunities by holding instruments from different markets.