Correlation Between Goldman Sachs and IShares Ultra

Can any of the company-specific risk be diversified away by investing in both Goldman Sachs and IShares Ultra 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 Ultra 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 Ultra Short Term, you can compare the effects of market volatilities on Goldman Sachs and IShares Ultra 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 Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and IShares Ultra.

Diversification Opportunities for Goldman Sachs and IShares Ultra

0.99

Correlation Coefficient

Goldman Sachs  IShares Ultra

No risk reduction

The 24 months correlation between Goldman and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Access and iShares Ultra Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Ultra Short 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 Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Ultra Short has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and IShares Ultra go up and down completely randomly.

Pair Corralation between Goldman Sachs and IShares Ultra

Given the investment horizon of 90 days Goldman Sachs is expected to generate 1.08 times less return on investment than IShares Ultra. In addition to that, Goldman Sachs is 1.37 times more volatile than iShares Ultra Short Term. It trades about 0.28 of its total potential returns per unit of risk. iShares Ultra Short Term is currently generating about 0.41 per unit of volatility. If you would invest  4,784  in iShares Ultra Short Term on January 25, 2024 and sell it today you would earn a total of  262.00  from holding iShares Ultra Short Term or generate 5.48% return on investment over 90 days.

Time Period	24 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.6%
Values	Daily Returns

Goldman Sachs Access  vs.  iShares Ultra Short Term

Goldman Sachs Access

Risk-Adjusted Performance

21 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Access are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

iShares Ultra Short

Risk-Adjusted Performance

29 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Ultra Short Term are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, IShares Ultra is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Goldman Sachs and IShares Ultra

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

The idea behind Goldman Sachs Access and iShares Ultra Short Term 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.