Correlation Between Goldman Sachs and FlexShares International

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

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

Diversification Opportunities for Goldman Sachs and FlexShares International

0.91

Correlation Coefficient

Goldman Sachs  FlexShares International

Almost no diversification

The 3 months correlation between Goldman and FlexShares is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs ActiveBeta and FlexShares International Quali in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares International 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 ActiveBeta are associated (or correlated) with FlexShares International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares International has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and FlexShares International go up and down completely randomly.

Pair Corralation between Goldman Sachs and FlexShares International

Given the investment horizon of 90 days Goldman Sachs is expected to generate 8.55 times less return on investment than FlexShares International. In addition to that, Goldman Sachs is 1.01 times more volatile than FlexShares International Quality. It trades about 0.01 of its total potential returns per unit of risk. FlexShares International Quality is currently generating about 0.12 per unit of volatility. If you would invest  2,402  in FlexShares International Quality on February 4, 2024 and sell it today you would earn a total of  49.00  from holding FlexShares International Quality or generate 2.04% return on investment over 90 days.

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

Goldman Sachs ActiveBeta  vs.  FlexShares International Quali

Goldman Sachs ActiveBeta

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs ActiveBeta are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

FlexShares International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares International Quality are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, FlexShares International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Goldman Sachs and FlexShares International

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

The idea behind Goldman Sachs ActiveBeta and FlexShares International Quality 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.