Correlation Between Metropolitan West and Goldman Sachs

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Can any of the company-specific risk be diversified away by investing in both Metropolitan West 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 Metropolitan West and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metropolitan West Porate and Goldman Sachs Clean, you can compare the effects of market volatilities on Metropolitan West 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 Metropolitan West with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan West and Goldman Sachs.

Diversification Opportunities for Metropolitan West and Goldman Sachs

0.51
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Metropolitan and Goldman is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West Porate and Goldman Sachs Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Clean and Metropolitan West 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 Metropolitan West Porate 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 Clean has no effect on the direction of Metropolitan West i.e., Metropolitan West and Goldman Sachs go up and down completely randomly.

Pair Corralation between Metropolitan West and Goldman Sachs

If you would invest  923.00  in Metropolitan West Porate on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Metropolitan West Porate or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Metropolitan West Porate  vs.  Goldman Sachs Clean

 Performance 
       Timeline  
Metropolitan West Porate 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Metropolitan West Porate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Metropolitan West is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Goldman Sachs Clean 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Goldman Sachs Clean has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Metropolitan West and Goldman Sachs Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Metropolitan West and Goldman Sachs

The main advantage of trading using opposite Metropolitan West and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan West 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 Metropolitan West Porate and Goldman Sachs Clean 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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