Correlation Between Goldman Sachs and WisdomTree Corporate

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

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

Diversification Opportunities for Goldman Sachs and WisdomTree Corporate

0.4

Correlation Coefficient

Goldman Sachs  WisdomTree Corporate

Very weak diversification

The 3 months correlation between Goldman and WisdomTree is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Access and WisdomTree Corporate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Corporate Bond and Goldman Sachs 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 Goldman Sachs Access are associated (or correlated) with WisdomTree Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Corporate Bond has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and WisdomTree Corporate go up and down completely randomly.

Pair Corralation between Goldman Sachs and WisdomTree Corporate

Given the investment horizon of 90 days Goldman Sachs Access is expected to generate 1.06 times more return on investment than WisdomTree Corporate. However, Goldman Sachs is 1.06 times more volatile than WisdomTree Corporate Bond. It trades about 0.09 of its potential returns per unit of risk. WisdomTree Corporate Bond is currently generating about 0.09 per unit of risk. If you would invest  4,485  in Goldman Sachs Access on December 29, 2024 and sell it today you would earn a total of  84.00  from holding Goldman Sachs Access or generate 1.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.16%
Values	Daily Returns

Goldman Sachs Access  vs.  WisdomTree Corporate Bond

Goldman Sachs Access

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Access are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

WisdomTree Corporate Bond

Risk-Adjusted Performance

Modest

Over the last 90 days WisdomTree Corporate Bond has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, WisdomTree Corporate is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Goldman Sachs and WisdomTree Corporate

The main advantage of trading using opposite Goldman Sachs and WisdomTree Corporate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goldman Sachs position performs unexpectedly, WisdomTree Corporate 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 WisdomTree Corporate will offset losses from the drop in WisdomTree Corporate's long position.

The idea behind Goldman Sachs Access and WisdomTree Corporate Bond 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.