Correlation Between AdvisorShares STAR and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both AdvisorShares STAR 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 AdvisorShares STAR and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AdvisorShares STAR Global and Goldman Sachs Nasdaq 100, you can compare the effects of market volatilities on AdvisorShares STAR 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 AdvisorShares STAR with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of AdvisorShares STAR and Goldman Sachs.
Diversification Opportunities for AdvisorShares STAR and Goldman Sachs
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between AdvisorShares and Goldman is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding AdvisorShares STAR Global and Goldman Sachs Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Nasdaq and AdvisorShares STAR 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 AdvisorShares STAR Global 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 Nasdaq has no effect on the direction of AdvisorShares STAR i.e., AdvisorShares STAR and Goldman Sachs go up and down completely randomly.
Pair Corralation between AdvisorShares STAR and Goldman Sachs
Given the investment horizon of 90 days AdvisorShares STAR is expected to generate 2.01 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, AdvisorShares STAR Global is 1.59 times less risky than Goldman Sachs. It trades about 0.09 of its potential returns per unit of risk. Goldman Sachs Nasdaq 100 is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 4,779 in Goldman Sachs Nasdaq 100 on August 26, 2024 and sell it today you would earn a total of 112.00 from holding Goldman Sachs Nasdaq 100 or generate 2.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
AdvisorShares STAR Global vs. Goldman Sachs Nasdaq 100
Performance |
| Timeline |
| AdvisorShares STAR Global |
| Goldman Sachs Nasdaq |
AdvisorShares STAR and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AdvisorShares STAR and Goldman Sachs
The main advantage of trading using opposite AdvisorShares STAR and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AdvisorShares STAR 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 AdvisorShares STAR Global and Goldman Sachs Nasdaq 100 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.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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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