Correlation Between Goldman Sachs and Vanguard Total

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

Diversification Opportunities for Goldman Sachs and Vanguard Total

1.0

Correlation Coefficient

Goldman Sachs  Vanguard Total

No risk reduction

The 3 months correlation between Goldman and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs ActiveBeta and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock 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 Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Vanguard Total go up and down completely randomly.

Pair Corralation between Goldman Sachs and Vanguard Total

Given the investment horizon of 90 days Goldman Sachs ActiveBeta is expected to under-perform the Vanguard Total. But the etf apears to be less risky and, when comparing its historical volatility, Goldman Sachs ActiveBeta is 1.03 times less risky than Vanguard Total. The etf trades about -0.18 of its potential returns per unit of risk. The Vanguard Total Stock is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  25,792  in Vanguard Total Stock on January 25, 2024 and sell it today you would lose (733.00) from holding Vanguard Total Stock or give up 2.84% of portfolio value over 90 days.

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

Goldman Sachs ActiveBeta  vs.  Vanguard Total Stock

Goldman Sachs ActiveBeta

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs ActiveBeta are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Goldman Sachs is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Vanguard Total Stock

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Goldman Sachs and Vanguard Total

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

The idea behind Goldman Sachs ActiveBeta and Vanguard Total Stock 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.