Correlation Between Vanguard Russell and Goldman Sachs

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

Diversification Opportunities for Vanguard Russell and Goldman Sachs

0.59

Correlation Coefficient

Vanguard Russell  Goldman Sachs

Very weak diversification

The 3 months correlation between Vanguard and Goldman is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 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 Vanguard 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 Vanguard 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 Vanguard Russell i.e., Vanguard Russell and Goldman Sachs go up and down completely randomly.

Pair Corralation between Vanguard Russell and Goldman Sachs

Given the investment horizon of 90 days Vanguard Russell is expected to generate 41.67 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Vanguard Russell 1000 is 1.03 times less risky than Goldman Sachs. It trades about 0.0 of its potential returns per unit of risk. Goldman Sachs Hedge is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  12,781  in Goldman Sachs Hedge on November 28, 2024 and sell it today you would earn a total of  40.00  from holding Goldman Sachs Hedge or generate 0.31% return on investment over 90 days.

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

Vanguard Russell 1000  vs.  Goldman Sachs Hedge

Vanguard Russell 1000

Risk-Adjusted Performance

Weak

Over the last 90 days Vanguard Russell 1000 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Vanguard Russell is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the 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 Vanguard Russell and Goldman Sachs

The main advantage of trading using opposite Vanguard Russell and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 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 Vanguard 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.