Correlation Between Goldman Sachs and Western Asset

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

By analyzing existing cross correlation between Goldman Sachs Short Term and Western Asset High, you can compare the effects of market volatilities on Goldman Sachs and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and Western Asset.

Diversification Opportunities for Goldman Sachs and Western Asset

0.86

Correlation Coefficient

Goldman Sachs  Western Asset

Very poor diversification

The 3 months correlation between Goldman and Western is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Short Term and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High 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 Short Term are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset High has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Western Asset go up and down completely randomly.

Pair Corralation between Goldman Sachs and Western Asset

Assuming the 90 days horizon Goldman Sachs Short Term is expected to generate 0.37 times more return on investment than Western Asset. However, Goldman Sachs Short Term is 2.67 times less risky than Western Asset. It trades about 0.23 of its potential returns per unit of risk. Western Asset High is currently generating about 0.07 per unit of risk. If you would invest  998.00  in Goldman Sachs Short Term on December 30, 2024 and sell it today you would earn a total of  12.00  from holding Goldman Sachs Short Term or generate 1.2% return on investment over 90 days.

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

Goldman Sachs Short Term  vs.  Western Asset High

Goldman Sachs Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Short Term are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Western Asset High

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset High are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Western Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Goldman Sachs and Western Asset

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

The idea behind Goldman Sachs Short Term and Western Asset High 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.