Correlation Between Goldman Sachs and Metropolitan West
Can any of the company-specific risk be diversified away by investing in both Goldman Sachs and Metropolitan West 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 Metropolitan West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Goldman Sachs E and Metropolitan West Total, you can compare the effects of market volatilities on Goldman Sachs and Metropolitan West 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 Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and Metropolitan West.
Diversification Opportunities for Goldman Sachs and Metropolitan West
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Goldman and Metropolitan is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs E and Metropolitan West Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West Total 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 E are associated (or correlated) with Metropolitan West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan West Total has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Metropolitan West go up and down completely randomly.
Pair Corralation between Goldman Sachs and Metropolitan West
Assuming the 90 days horizon Goldman Sachs E is expected to generate 0.87 times more return on investment than Metropolitan West. However, Goldman Sachs E is 1.15 times less risky than Metropolitan West. It trades about -0.12 of its potential returns per unit of risk. Metropolitan West Total is currently generating about -0.11 per unit of risk. If you would invest 907.00 in Goldman Sachs E on January 24, 2024 and sell it today you would lose (16.00) from holding Goldman Sachs E or give up 1.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.62% |
| Values | Daily Returns |
Goldman Sachs E vs. Metropolitan West Total
Performance |
| Timeline |
| Goldman Sachs E |
| Metropolitan West Total |
Goldman Sachs and Metropolitan West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goldman Sachs and Metropolitan West
The main advantage of trading using opposite Goldman Sachs and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goldman Sachs position performs unexpectedly, Metropolitan West 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 Metropolitan West will offset losses from the drop in Metropolitan West's long position.| Goldman Sachs vs. Goldman Sachs Clean | Goldman Sachs vs. Goldman Sachs Clean | Goldman Sachs vs. Goldman Sachs Clean | Goldman Sachs vs. Goldman Sachs Clean |
| Metropolitan West vs. Metropolitan West Alpha | Metropolitan West vs. Metropolitan West Porate | Metropolitan West vs. Metropolitan West Unconstrained | Metropolitan West vs. Metropolitan West Porate |
Check out your portfolio center.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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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