Correlation Between Vanguard Developed and Goldman Sachs

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

By analyzing existing cross correlation between Vanguard Developed Markets and Goldman Sachs International, you can compare the effects of market volatilities on Vanguard Developed 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 Vanguard Developed with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Developed and Goldman Sachs.

Diversification Opportunities for Vanguard Developed and Goldman Sachs

0.95

Correlation Coefficient

Vanguard Developed  Goldman Sachs

Almost no diversification

The 3 months correlation between Vanguard and Goldman is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Developed Markets and Goldman Sachs International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Intern and Vanguard Developed 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 Vanguard Developed Markets 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 Intern has no effect on the direction of Vanguard Developed i.e., Vanguard Developed and Goldman Sachs go up and down completely randomly.

Pair Corralation between Vanguard Developed and Goldman Sachs

Assuming the 90 days horizon Vanguard Developed is expected to generate 1.46 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Vanguard Developed Markets is 1.15 times less risky than Goldman Sachs. It trades about 0.13 of its potential returns per unit of risk. Goldman Sachs International is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,415  in Goldman Sachs International on March 17, 2024 and sell it today you would earn a total of  93.00  from holding Goldman Sachs International or generate 6.57% return on investment over 90 days.

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

Vanguard Developed Markets  vs.  Goldman Sachs International

Vanguard Developed

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Developed Markets are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Vanguard Developed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs Intern

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs International are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Developed and Goldman Sachs

The main advantage of trading using opposite Vanguard Developed and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Developed 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.

The idea behind Vanguard Developed Markets and Goldman Sachs International 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 Transaction History module to view history of all your transactions and understand their impact on performance.