Correlation Between SPDR MSCI and Goldman Sachs

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

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

Diversification Opportunities for SPDR MSCI and Goldman Sachs

0.92

Correlation Coefficient

SPDR MSCI  Goldman Sachs

Almost no diversification

The 3 months correlation between SPDR and Goldman is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI World 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 SPDR MSCI 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 SPDR MSCI World 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 SPDR MSCI i.e., SPDR MSCI and Goldman Sachs go up and down completely randomly.

Pair Corralation between SPDR MSCI and Goldman Sachs

Given the investment horizon of 90 days SPDR MSCI is expected to generate 1.07 times less return on investment than Goldman Sachs. In addition to that, SPDR MSCI is 1.0 times more volatile than Goldman Sachs ActiveBeta. It trades about 0.11 of its total potential returns per unit of risk. Goldman Sachs ActiveBeta is currently generating about 0.12 per unit of volatility. If you would invest  4,285  in Goldman Sachs ActiveBeta on September 19, 2024 and sell it today you would earn a total of  790.00  from holding Goldman Sachs ActiveBeta or generate 18.44% return on investment over 90 days.

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

SPDR MSCI World  vs.  Goldman Sachs ActiveBeta

SPDR MSCI World

Risk-Adjusted Performance

0 of 100

Very Weak

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

Goldman Sachs ActiveBeta

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs ActiveBeta are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Goldman Sachs is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with SPDR MSCI and Goldman Sachs

The main advantage of trading using opposite SPDR MSCI and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR MSCI 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 SPDR MSCI World 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.