Correlation Between Vanguard Growth and Goldman Sachs

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

Diversification Opportunities for Vanguard Growth and Goldman Sachs

0.48

Correlation Coefficient

Vanguard Growth  Goldman Sachs

Very weak diversification

The 3 months correlation between Vanguard and Goldman is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index 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 Vanguard Growth 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 Growth Index 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 Vanguard Growth i.e., Vanguard Growth and Goldman Sachs go up and down completely randomly.

Pair Corralation between Vanguard Growth and Goldman Sachs

Considering the 90-day investment horizon Vanguard Growth Index is expected to under-perform the Goldman Sachs. In addition to that, Vanguard Growth is 1.02 times more volatile than Goldman Sachs Physical. It trades about -0.35 of its total potential returns per unit of risk. Goldman Sachs Physical is currently generating about 0.45 per unit of volatility. If you would invest  2,160  in Goldman Sachs Physical on January 21, 2024 and sell it today you would earn a total of  204.00  from holding Goldman Sachs Physical or generate 9.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Vanguard Growth Index  vs.  Goldman Sachs Physical

Vanguard Growth Index

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Growth Index are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Vanguard Growth is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Goldman Sachs Physical

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Physical are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Growth and Goldman Sachs

The main advantage of trading using opposite Vanguard Growth and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Growth 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 Growth Index 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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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.