Correlation Between FMC and Goldman Sachs

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

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

Diversification Opportunities for FMC and Goldman Sachs

0.11

Correlation Coefficient

FMC  Goldman Sachs

Average diversification

The 3 months correlation between FMC and Goldman is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding FMC Corp. and Goldman Sachs Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Dynamic and FMC 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 FMC Corporation 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 Dynamic has no effect on the direction of FMC i.e., FMC and Goldman Sachs go up and down completely randomly.

Pair Corralation between FMC and Goldman Sachs

Considering the 90-day investment horizon FMC Corporation is expected to generate 8.84 times more return on investment than Goldman Sachs. However, FMC is 8.84 times more volatile than Goldman Sachs Dynamic. It trades about 0.27 of its potential returns per unit of risk. Goldman Sachs Dynamic is currently generating about 0.06 per unit of risk. If you would invest  4,914  in FMC Corporation on October 22, 2024 and sell it today you would earn a total of  429.00  from holding FMC Corporation or generate 8.73% return on investment over 90 days.

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

FMC Corp.  vs.  Goldman Sachs Dynamic

FMC Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FMC Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Goldman Sachs Dynamic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Dynamic 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 FMC and Goldman Sachs

The main advantage of trading using opposite FMC and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FMC 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 FMC Corporation and Goldman Sachs Dynamic 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.