Correlation Between IShares GSCI and Goldman Sachs

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

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

Diversification Opportunities for IShares GSCI and Goldman Sachs

0.58

Correlation Coefficient

IShares GSCI  Goldman Sachs

Very weak diversification

The 3 months correlation between IShares and Goldman is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding iShares GSCI Commodity and Goldman Sachs ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs ETF and IShares GSCI 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 iShares GSCI Commodity 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 ETF has no effect on the direction of IShares GSCI i.e., IShares GSCI and Goldman Sachs go up and down completely randomly.

Pair Corralation between IShares GSCI and Goldman Sachs

Given the investment horizon of 90 days iShares GSCI Commodity is expected to under-perform the Goldman Sachs. In addition to that, IShares GSCI is 1.08 times more volatile than Goldman Sachs ETF. It trades about -0.02 of its total potential returns per unit of risk. Goldman Sachs ETF is currently generating about 0.14 per unit of volatility. If you would invest  3,934  in Goldman Sachs ETF on February 6, 2024 and sell it today you would earn a total of  946.00  from holding Goldman Sachs ETF or generate 24.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	29.7%
Values	Daily Returns

iShares GSCI Commodity  vs.  Goldman Sachs ETF

iShares GSCI Commodity

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares GSCI Commodity are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady primary indicators, IShares GSCI may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Goldman Sachs ETF

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs ETF are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Goldman Sachs may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with IShares GSCI and Goldman Sachs

The main advantage of trading using opposite IShares GSCI and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares GSCI 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 iShares GSCI Commodity and Goldman Sachs ETF 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.