Correlation Between WisdomTree Europe and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both WisdomTree Europe 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 Europe 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 Europe Quality and Goldman Sachs ActiveBeta, you can compare the effects of market volatilities on WisdomTree Europe 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 Europe with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Europe and Goldman Sachs.
Diversification Opportunities for WisdomTree Europe and Goldman Sachs
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WisdomTree and Goldman is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Europe 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 Europe 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 Europe 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 Europe i.e., WisdomTree Europe and Goldman Sachs go up and down completely randomly.
Pair Corralation between WisdomTree Europe and Goldman Sachs
Given the investment horizon of 90 days WisdomTree Europe is expected to generate 1.61 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, WisdomTree Europe Quality is 1.34 times less risky than Goldman Sachs. It trades about 0.05 of its potential returns per unit of risk. Goldman Sachs ActiveBeta is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,321 in Goldman Sachs ActiveBeta on September 1, 2024 and sell it today you would earn a total of 555.00 from holding Goldman Sachs ActiveBeta or generate 16.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.63% |
| Values | Daily Returns |
WisdomTree Europe Quality vs. Goldman Sachs ActiveBeta
Performance |
| Timeline |
| WisdomTree Europe Quality |
| Goldman Sachs ActiveBeta |
WisdomTree Europe and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Europe and Goldman Sachs
The main advantage of trading using opposite WisdomTree Europe and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Europe 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.| WisdomTree Europe vs. WisdomTree Europe Hedged | WisdomTree Europe vs. WisdomTree International Hedged | WisdomTree Europe vs. WisdomTree Emerging Markets | WisdomTree Europe vs. ProShares MSCI Europe |
| Goldman Sachs vs. Goldman Sachs ActiveBeta | Goldman Sachs vs. Goldman Sachs ActiveBeta | Goldman Sachs vs. iShares Currency Hedged | Goldman Sachs vs. First Trust Japan |
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 the Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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