Correlation Between Goldman Sachs and IShares Aaa

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

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

Diversification Opportunities for Goldman Sachs and IShares Aaa

1.0

Correlation Coefficient

Goldman Sachs  IShares Aaa

No risk reduction

The 3 months correlation between Goldman and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Access and iShares Aaa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Aaa and Goldman Sachs 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 Goldman Sachs Access are associated (or correlated) with IShares Aaa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Aaa has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and IShares Aaa go up and down completely randomly.

Pair Corralation between Goldman Sachs and IShares Aaa

Given the investment horizon of 90 days Goldman Sachs Access is expected to generate 0.97 times more return on investment than IShares Aaa. However, Goldman Sachs Access is 1.03 times less risky than IShares Aaa. It trades about 0.05 of its potential returns per unit of risk. iShares Aaa is currently generating about 0.05 per unit of risk. If you would invest  4,426  in Goldman Sachs Access on September 26, 2024 and sell it today you would earn a total of  95.00  from holding Goldman Sachs Access or generate 2.15% return on investment over 90 days.

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

Goldman Sachs Access  vs.  iShares Aaa

Goldman Sachs Access

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Access has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

iShares Aaa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Aaa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Aaa is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Goldman Sachs and IShares Aaa

The main advantage of trading using opposite Goldman Sachs and IShares Aaa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goldman Sachs position performs unexpectedly, IShares Aaa 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 IShares Aaa will offset losses from the drop in IShares Aaa's long position.

The idea behind Goldman Sachs Access and iShares Aaa 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.