Correlation Between Goldman Sachs and Pimco Total

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

By analyzing existing cross correlation between Goldman Sachs Clean and Pimco Total Return, you can compare the effects of market volatilities on Goldman Sachs and Pimco Total 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 Pimco Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and Pimco Total.

Diversification Opportunities for Goldman Sachs and Pimco Total

0.77

Correlation Coefficient

Goldman Sachs  Pimco Total

Poor diversification

The 3 months correlation between Goldman and Pimco is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Clean and Pimco Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Total Return 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 Clean are associated (or correlated) with Pimco Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Total Return has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Pimco Total go up and down completely randomly.

Pair Corralation between Goldman Sachs and Pimco Total

Assuming the 90 days horizon Goldman Sachs Clean is expected to under-perform the Pimco Total. In addition to that, Goldman Sachs is 3.65 times more volatile than Pimco Total Return. It trades about -0.19 of its total potential returns per unit of risk. Pimco Total Return is currently generating about -0.09 per unit of volatility. If you would invest  881.00  in Pimco Total Return on September 12, 2024 and sell it today you would lose (15.00) from holding Pimco Total Return or give up 1.7% of portfolio value over 90 days.

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

Goldman Sachs Clean  vs.  Pimco Total Return

Goldman Sachs Clean

Risk-Adjusted Performance

0 of 100

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 fundamental drivers remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pimco Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Goldman Sachs and Pimco Total

The main advantage of trading using opposite Goldman Sachs and Pimco Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goldman Sachs position performs unexpectedly, Pimco Total 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 Pimco Total will offset losses from the drop in Pimco Total's long position.

The idea behind Goldman Sachs Clean and Pimco Total Return 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.