Correlation Between Wilmington Trust and Goldman Sachs

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

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

Diversification Opportunities for Wilmington Trust and Goldman Sachs

0.56

Correlation Coefficient

Wilmington Trust  Goldman Sachs

Very weak diversification

The 3 months correlation between Wilmington and Goldman is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Wilmington Trust Retirement 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 Wilmington Trust 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 Wilmington Trust Retirement 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 Wilmington Trust i.e., Wilmington Trust and Goldman Sachs go up and down completely randomly.

Pair Corralation between Wilmington Trust and Goldman Sachs

Assuming the 90 days trading horizon Wilmington Trust Retirement is expected to under-perform the Goldman Sachs. In addition to that, Wilmington Trust is 1.1 times more volatile than Goldman Sachs Clean. It trades about -0.27 of its total potential returns per unit of risk. Goldman Sachs Clean is currently generating about 0.17 per unit of volatility. If you would invest  799.00  in Goldman Sachs Clean on December 5, 2024 and sell it today you would earn a total of  25.00  from holding Goldman Sachs Clean or generate 3.13% return on investment over 90 days.

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

Wilmington Trust Retirement  vs.  Goldman Sachs Clean

Wilmington Trust Ret

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wilmington Trust Retirement has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Goldman Sachs Clean

Risk-Adjusted Performance

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 fairly strong 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.

Pair Trading with Wilmington Trust and Goldman Sachs

The main advantage of trading using opposite Wilmington Trust and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wilmington Trust 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 Wilmington Trust Retirement 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.