Correlation Between Western Asset and Goldman Sachs

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

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

Diversification Opportunities for Western Asset and Goldman Sachs

0.4

Correlation Coefficient

Western Asset  Goldman Sachs

Very weak diversification

The 3 months correlation between Western and Goldman is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Inflation and Goldman Sachs Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Long and Western Asset 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 Western Asset Inflation 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 Long has no effect on the direction of Western Asset i.e., Western Asset and Goldman Sachs go up and down completely randomly.

Pair Corralation between Western Asset and Goldman Sachs

Assuming the 90 days horizon Western Asset is expected to generate 13.91 times less return on investment than Goldman Sachs. In addition to that, Western Asset is 1.91 times more volatile than Goldman Sachs Long. It trades about 0.01 of its total potential returns per unit of risk. Goldman Sachs Long is currently generating about 0.15 per unit of volatility. If you would invest  690.00  in Goldman Sachs Long on October 5, 2024 and sell it today you would earn a total of  102.00  from holding Goldman Sachs Long or generate 14.78% return on investment over 90 days.

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

Western Asset Inflation  vs.  Goldman Sachs Long

Western Asset Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Inflation has generated negative risk-adjusted returns adding no value to fund investors. 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.

Goldman Sachs Long

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Long has generated negative risk-adjusted returns adding no value to fund investors. 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.

Pair Trading with Western Asset and Goldman Sachs

The main advantage of trading using opposite Western Asset and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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 Western Asset Inflation and Goldman Sachs Long 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.