Correlation Between IShares Equity and Goldman Sachs

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

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

Diversification Opportunities for IShares Equity and Goldman Sachs

0.99

Correlation Coefficient

IShares Equity  Goldman Sachs

No risk reduction

The 3 months correlation between IShares and Goldman is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Equity Factor 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 IShares Equity 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 iShares Equity Factor 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 IShares Equity i.e., IShares Equity and Goldman Sachs go up and down completely randomly.

Pair Corralation between IShares Equity and Goldman Sachs

Given the investment horizon of 90 days iShares Equity Factor is expected to generate 1.05 times more return on investment than Goldman Sachs. However, IShares Equity is 1.05 times more volatile than Goldman Sachs ActiveBeta. It trades about -0.15 of its potential returns per unit of risk. Goldman Sachs ActiveBeta is currently generating about -0.17 per unit of risk. If you would invest  5,344  in iShares Equity Factor on February 3, 2024 and sell it today you would lose (165.00) from holding iShares Equity Factor or give up 3.09% of portfolio value over 90 days.

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

iShares Equity Factor  vs.  Goldman Sachs ActiveBeta

iShares Equity Factor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Equity Factor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, IShares Equity is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Goldman Sachs ActiveBeta

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs ActiveBeta are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Goldman Sachs is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Equity and Goldman Sachs

The main advantage of trading using opposite IShares Equity and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Equity 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 iShares Equity Factor 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.