Correlation Between Vanguard Small and Goldman Sachs

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

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

Diversification Opportunities for Vanguard Small and Goldman Sachs

1.0

Correlation Coefficient

Vanguard Small  Goldman Sachs

No risk reduction

The 3 months correlation between Vanguard and Goldman is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index 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 Vanguard Small 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 Vanguard Small Cap Index 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 Vanguard Small i.e., Vanguard Small and Goldman Sachs go up and down completely randomly.

Pair Corralation between Vanguard Small and Goldman Sachs

Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to generate 0.98 times more return on investment than Goldman Sachs. However, Vanguard Small Cap Index is 1.02 times less risky than Goldman Sachs. It trades about -0.1 of its potential returns per unit of risk. Goldman Sachs ActiveBeta is currently generating about -0.11 per unit of risk. If you would invest  23,912  in Vanguard Small Cap Index on December 29, 2024 and sell it today you would lose (1,749) from holding Vanguard Small Cap Index or give up 7.31% of portfolio value over 90 days.

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

Vanguard Small Cap Index  vs.  Goldman Sachs ActiveBeta

Vanguard Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Small Cap Index has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Etf's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Goldman Sachs ActiveBeta

Risk-Adjusted Performance

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 latest unsteady performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Vanguard Small and Goldman Sachs

The main advantage of trading using opposite Vanguard Small and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small 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 Vanguard Small Cap Index 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .