Correlation Between WisdomTree SmallCap and Goldman Sachs

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

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

Diversification Opportunities for WisdomTree SmallCap and Goldman Sachs

0.74

Correlation Coefficient

WisdomTree SmallCap  Goldman Sachs

Poor diversification

The 3 months correlation between WisdomTree and Goldman is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SmallCap Quality and Goldman Sachs ActiveBeta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs ActiveBeta and WisdomTree SmallCap 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 WisdomTree SmallCap Quality 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 ActiveBeta has no effect on the direction of WisdomTree SmallCap i.e., WisdomTree SmallCap and Goldman Sachs go up and down completely randomly.

Pair Corralation between WisdomTree SmallCap and Goldman Sachs

Given the investment horizon of 90 days WisdomTree SmallCap is expected to generate 1.49 times less return on investment than Goldman Sachs. In addition to that, WisdomTree SmallCap is 1.19 times more volatile than Goldman Sachs ActiveBeta. It trades about 0.1 of its total potential returns per unit of risk. Goldman Sachs ActiveBeta is currently generating about 0.18 per unit of volatility. If you would invest  3,075  in Goldman Sachs ActiveBeta on February 20, 2024 and sell it today you would earn a total of  257.00  from holding Goldman Sachs ActiveBeta or generate 8.36% return on investment over 90 days.

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

WisdomTree SmallCap Quality  vs.  Goldman Sachs ActiveBeta

WisdomTree SmallCap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree SmallCap Quality are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, WisdomTree SmallCap is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Goldman Sachs ActiveBeta

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs ActiveBeta are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Goldman Sachs may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with WisdomTree SmallCap and Goldman Sachs

The main advantage of trading using opposite WisdomTree SmallCap and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree SmallCap 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 WisdomTree SmallCap Quality and Goldman Sachs ActiveBeta 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..