Correlation Between IShares Technology and Goldman Sachs

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

Diversification Opportunities for IShares Technology and Goldman Sachs

0.73

Correlation Coefficient

IShares Technology  Goldman Sachs

Poor diversification

The 3 months correlation between IShares and Goldman is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding iShares Technology ETF and Goldman Sachs Innovate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Innovate and IShares Technology 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 Technology ETF 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 Innovate has no effect on the direction of IShares Technology i.e., IShares Technology and Goldman Sachs go up and down completely randomly.

Pair Corralation between IShares Technology and Goldman Sachs

Considering the 90-day investment horizon iShares Technology ETF is expected to under-perform the Goldman Sachs. In addition to that, IShares Technology is 1.5 times more volatile than Goldman Sachs Innovate. It trades about -0.12 of its total potential returns per unit of risk. Goldman Sachs Innovate is currently generating about -0.03 per unit of volatility. If you would invest  6,188  in Goldman Sachs Innovate on December 29, 2024 and sell it today you would lose (139.00) from holding Goldman Sachs Innovate or give up 2.25% of portfolio value over 90 days.

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

iShares Technology ETF  vs.  Goldman Sachs Innovate

iShares Technology ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Technology ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Etf's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the fund sophisticated investors.

Goldman Sachs Innovate

Risk-Adjusted Performance

Very Weak

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

Pair Trading with IShares Technology and Goldman Sachs

The main advantage of trading using opposite IShares Technology and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Technology 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 Technology ETF and Goldman Sachs Innovate 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.