Correlation Between Baird Strategic and Goldman Sachs

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

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

Diversification Opportunities for Baird Strategic and Goldman Sachs

0.52

Correlation Coefficient

Baird Strategic  Goldman Sachs

Very weak diversification

The 3 months correlation between Baird and Goldman is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Baird Strategic Municipal and Goldman Sachs Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Income and Baird Strategic 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 Baird Strategic Municipal 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 Income has no effect on the direction of Baird Strategic i.e., Baird Strategic and Goldman Sachs go up and down completely randomly.

Pair Corralation between Baird Strategic and Goldman Sachs

Assuming the 90 days horizon Baird Strategic is expected to generate 2.25 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Baird Strategic Municipal is 2.53 times less risky than Goldman Sachs. It trades about 0.09 of its potential returns per unit of risk. Goldman Sachs Income is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,256  in Goldman Sachs Income on September 29, 2024 and sell it today you would earn a total of  353.00  from holding Goldman Sachs Income or generate 15.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Baird Strategic Municipal  vs.  Goldman Sachs Income

Baird Strategic Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baird Strategic Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Baird Strategic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward 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 Baird Strategic and Goldman Sachs

The main advantage of trading using opposite Baird Strategic and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baird Strategic 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 Baird Strategic Municipal and Goldman Sachs Income 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.