Correlation Between IShares Russell and Goldman Sachs

Can any of the company-specific risk be diversified away by investing in both IShares Russell 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 Russell 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 Russell 1000 and Goldman Sachs Hedge, you can compare the effects of market volatilities on IShares Russell 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 Russell with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and Goldman Sachs.

Diversification Opportunities for IShares Russell and Goldman Sachs

0.84

Correlation Coefficient

IShares Russell  Goldman Sachs

Very poor diversification

The 3 months correlation between IShares and Goldman is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 1000 and Goldman Sachs Hedge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Hedge and IShares Russell 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 Russell 1000 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 Hedge has no effect on the direction of IShares Russell i.e., IShares Russell and Goldman Sachs go up and down completely randomly.

Pair Corralation between IShares Russell and Goldman Sachs

Considering the 90-day investment horizon iShares Russell 1000 is expected to under-perform the Goldman Sachs. But the etf apears to be less risky and, when comparing its historical volatility, iShares Russell 1000 is 1.08 times less risky than Goldman Sachs. The etf trades about -0.1 of its potential returns per unit of risk. The Goldman Sachs Hedge is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  12,491  in Goldman Sachs Hedge on December 29, 2024 and sell it today you would lose (706.00) from holding Goldman Sachs Hedge or give up 5.65% of portfolio value over 90 days.

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

iShares Russell 1000  vs.  Goldman Sachs Hedge

iShares Russell 1000

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Russell 1000 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Goldman Sachs Hedge

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goldman Sachs Hedge has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares Russell and Goldman Sachs

The main advantage of trading using opposite IShares Russell and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell 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 Russell 1000 and Goldman Sachs Hedge 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.