Correlation Between WisdomTree Emerging and Goldman Sachs

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

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

Diversification Opportunities for WisdomTree Emerging and Goldman Sachs

0.99

Correlation Coefficient

WisdomTree Emerging  Goldman Sachs

No risk reduction

The 3 months correlation between WisdomTree and Goldman is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and Goldman Sachs MarketBeta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs MarketBeta and WisdomTree Emerging 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 WisdomTree Emerging Markets 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 MarketBeta has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and Goldman Sachs go up and down completely randomly.

Pair Corralation between WisdomTree Emerging and Goldman Sachs

Given the investment horizon of 90 days WisdomTree Emerging Markets is expected to under-perform the Goldman Sachs. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree Emerging Markets is 1.06 times less risky than Goldman Sachs. The etf trades about -0.09 of its potential returns per unit of risk. The Goldman Sachs MarketBeta is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  4,614  in Goldman Sachs MarketBeta on October 27, 2024 and sell it today you would lose (160.00) from holding Goldman Sachs MarketBeta or give up 3.47% of portfolio value over 90 days.

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

WisdomTree Emerging Markets  vs.  Goldman Sachs MarketBeta

WisdomTree Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

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

Goldman Sachs MarketBeta

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs MarketBeta has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Goldman Sachs is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with WisdomTree Emerging and Goldman Sachs

The main advantage of trading using opposite WisdomTree Emerging and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Emerging 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 WisdomTree Emerging Markets and Goldman Sachs MarketBeta 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.