Correlation Between Vanguard Small and Goldman Sachs

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

Diversification Opportunities for Vanguard Small and Goldman Sachs

0.57

Correlation Coefficient

Vanguard Small  Goldman Sachs

Very weak diversification

The 3 months correlation between Vanguard and Goldman is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index 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 Vanguard Small 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 Small Cap Index 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 Vanguard Small i.e., Vanguard Small and Goldman Sachs go up and down completely randomly.

Pair Corralation between Vanguard Small and Goldman Sachs

Allowing for the 90-day total investment horizon Vanguard Small is expected to generate 1.45 times less return on investment than Goldman Sachs. In addition to that, Vanguard Small is 1.19 times more volatile than Goldman Sachs ActiveBeta. It trades about 0.08 of its total potential returns per unit of risk. Goldman Sachs ActiveBeta is currently generating about 0.14 per unit of volatility. If you would invest  3,109  in Goldman Sachs ActiveBeta on February 22, 2024 and sell it today you would earn a total of  195.00  from holding Goldman Sachs ActiveBeta or generate 6.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Vanguard Small Cap Index  vs.  Goldman Sachs ActiveBeta

Vanguard Small Cap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Index are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Vanguard Small is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs ActiveBeta

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs ActiveBeta are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Goldman Sachs is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Small and Goldman Sachs

The main advantage of trading using opposite Vanguard Small and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small 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 Small Cap Index 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.