Correlation Between Vanguard Small-cap and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap 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 Small-cap 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 Small Cap Value and Goldman Sachs High, you can compare the effects of market volatilities on Vanguard Small-cap 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 Small-cap with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Goldman Sachs.
Diversification Opportunities for Vanguard Small-cap and Goldman Sachs
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Goldman is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Goldman Sachs High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs High and Vanguard Small-cap 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 Small Cap Value 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 High has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Goldman Sachs go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Goldman Sachs
Assuming the 90 days horizon Vanguard Small Cap Value is expected to generate 6.57 times more return on investment than Goldman Sachs. However, Vanguard Small-cap is 6.57 times more volatile than Goldman Sachs High. It trades about 0.11 of its potential returns per unit of risk. Goldman Sachs High is currently generating about 0.21 per unit of risk. If you would invest 3,981 in Vanguard Small Cap Value on September 2, 2024 and sell it today you would earn a total of 1,197 from holding Vanguard Small Cap Value or generate 30.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Value vs. Goldman Sachs High
Performance |
| Timeline |
| Vanguard Small Cap |
| Goldman Sachs High |
Vanguard Small-cap and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Goldman Sachs
The main advantage of trading using opposite Vanguard Small-cap and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap 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.| Vanguard Small-cap vs. John Hancock Financial | Vanguard Small-cap vs. Mesirow Financial Small | Vanguard Small-cap vs. Transamerica Financial Life | Vanguard Small-cap vs. Icon Financial Fund |
| Goldman Sachs vs. Palm Valley Capital | Goldman Sachs vs. Vanguard Small Cap Value | Goldman Sachs vs. Lord Abbett Small | Goldman Sachs vs. Mid Cap Value Profund |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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