Correlation Between Goldman Sachs and Vanguard Value

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

By analyzing existing cross correlation between Goldman Sachs Physical and Vanguard Value Index, you can compare the effects of market volatilities on Goldman Sachs and Vanguard Value 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 Vanguard Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and Vanguard Value.

Diversification Opportunities for Goldman Sachs and Vanguard Value

0.7

Correlation Coefficient

Goldman Sachs  Vanguard Value

Poor diversification

The 3 months correlation between Goldman and Vanguard is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Physical and Vanguard Value Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Value Index 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 Physical are associated (or correlated) with Vanguard Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Value Index has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Vanguard Value go up and down completely randomly.

Pair Corralation between Goldman Sachs and Vanguard Value

Given the investment horizon of 90 days Goldman Sachs Physical is expected to generate 1.4 times more return on investment than Vanguard Value. However, Goldman Sachs is 1.4 times more volatile than Vanguard Value Index. It trades about 0.43 of its potential returns per unit of risk. Vanguard Value Index is currently generating about -0.22 per unit of risk. If you would invest  2,161  in Goldman Sachs Physical on January 20, 2024 and sell it today you would earn a total of  196.00  from holding Goldman Sachs Physical or generate 9.07% return on investment over 90 days.

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

Goldman Sachs Physical  vs.  Vanguard Value Index

Goldman Sachs Physical

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Physical are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Vanguard Value Index

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Value Index are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Vanguard Value is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Goldman Sachs and Vanguard Value

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

The idea behind Goldman Sachs Physical and Vanguard Value Index 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.