Correlation Between SPDR SP and Goldman Sachs

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Can any of the company-specific risk be diversified away by investing in both SPDR SP 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 SPDR SP and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 500 and Goldman Sachs Physical, you can compare the effects of market volatilities on SPDR SP 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 SPDR SP with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Goldman Sachs.

Diversification Opportunities for SPDR SP and Goldman Sachs

0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between SPDR SP and Goldman is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Goldman Sachs Physical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Physical and SPDR SP 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 SPDR SP 500 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 Physical has no effect on the direction of SPDR SP i.e., SPDR SP and Goldman Sachs go up and down completely randomly.

Pair Corralation between SPDR SP and Goldman Sachs

Considering the 90-day investment horizon SPDR SP 500 is expected to generate 1.28 times more return on investment than Goldman Sachs. However, SPDR SP is 1.28 times more volatile than Goldman Sachs Physical. It trades about 0.36 of its potential returns per unit of risk. Goldman Sachs Physical is currently generating about 0.41 per unit of risk. If you would invest  37,666  in SPDR SP 500 on October 29, 2022 and sell it today you would earn a total of  2,902  from holding SPDR SP 500 or generate 7.7% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

SPDR SP 500  vs.  Goldman Sachs Physical

 Performance (%) 
       Timeline  
SPDR SP 500 
SPDR SP Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, SPDR SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

SPDR SP Price Channel

Goldman Sachs Physical 
Goldman Performance
21 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Physical are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Goldman Price Channel

SPDR SP and Goldman Sachs Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SPDR SP and Goldman Sachs

The main advantage of trading using opposite SPDR SP and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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.
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The idea behind SPDR SP 500 and Goldman Sachs Physical 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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Check out your portfolio center. 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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