Correlation Between US Treasury and Goldman Sachs

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

By analyzing existing cross correlation between US Treasury 12 and Goldman Sachs ETF, you can compare the effects of market volatilities on US Treasury 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 US Treasury with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Treasury and Goldman Sachs.

Diversification Opportunities for US Treasury and Goldman Sachs

0.96

Correlation Coefficient

US Treasury  Goldman Sachs

Almost no diversification

The 3 months correlation between OBIL and Goldman is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding US Treasury 12 and Goldman Sachs ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs ETF and US Treasury 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 US Treasury 12 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 ETF has no effect on the direction of US Treasury i.e., US Treasury and Goldman Sachs go up and down completely randomly.

Pair Corralation between US Treasury and Goldman Sachs

Given the investment horizon of 90 days US Treasury is expected to generate 2.42 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, US Treasury 12 is 9.86 times less risky than Goldman Sachs. It trades about 0.31 of its potential returns per unit of risk. Goldman Sachs ETF is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,396  in Goldman Sachs ETF on June 26, 2024 and sell it today you would earn a total of  843.00  from holding Goldman Sachs ETF or generate 24.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	94.14%
Values	Daily Returns

US Treasury 12  vs.  Goldman Sachs ETF

US Treasury 12

Risk-Adjusted Performance

46 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in US Treasury 12 are ranked lower than 46 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, US Treasury is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Goldman Sachs ETF

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs ETF are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary 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 US Treasury and Goldman Sachs

The main advantage of trading using opposite US Treasury and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Treasury 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 US Treasury 12 and Goldman Sachs ETF 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.