Correlation Between Goldman Sachs and Whiting Petroleum

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

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

Diversification Opportunities for Goldman Sachs and Whiting Petroleum

-0.47

Correlation Coefficient

Goldman Sachs  Whiting Petroleum

Very good diversification

The 3 months correlation between Goldman and Whiting is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Group and Whiting Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whiting Petroleum 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 Group are associated (or correlated) with Whiting Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whiting Petroleum has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Whiting Petroleum go up and down completely randomly.

Pair Corralation between Goldman Sachs and Whiting Petroleum

Allowing for the 90-day total investment horizon Goldman Sachs is expected to generate 1.1 times less return on investment than Whiting Petroleum. But when comparing it to its historical volatility, Goldman Sachs Group is 3.19 times less risky than Whiting Petroleum. It trades about 0.08 of its potential returns per unit of risk. Whiting Petroleum is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,010  in Whiting Petroleum on October 11, 2024 and sell it today you would earn a total of  190.00  from holding Whiting Petroleum or generate 9.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	82.02%
Values	Daily Returns

Goldman Sachs Group  vs.  Whiting Petroleum

Goldman Sachs Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Whiting Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whiting Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Whiting Petroleum is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Goldman Sachs and Whiting Petroleum

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

The idea behind Goldman Sachs Group and Whiting Petroleum 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.