Correlation Between Federated Total and Goldman Sachs

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

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

Diversification Opportunities for Federated Total and Goldman Sachs

0.66

Correlation Coefficient

Federated Total  Goldman Sachs

Poor diversification

The 3 months correlation between Federated and Goldman is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Federated Total Return and Goldman Sachs Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Real and Federated Total 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 Federated Total Return 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 Real has no effect on the direction of Federated Total i.e., Federated Total and Goldman Sachs go up and down completely randomly.

Pair Corralation between Federated Total and Goldman Sachs

Assuming the 90 days horizon Federated Total Return is expected to generate 0.29 times more return on investment than Goldman Sachs. However, Federated Total Return is 3.46 times less risky than Goldman Sachs. It trades about 0.12 of its potential returns per unit of risk. Goldman Sachs Real is currently generating about 0.01 per unit of risk. If you would invest  918.00  in Federated Total Return on December 24, 2024 and sell it today you would earn a total of  21.00  from holding Federated Total Return or generate 2.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Federated Total Return  vs.  Goldman Sachs Real

Federated Total Return

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Total Return are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Federated Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs Real

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goldman Sachs Real 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 Federated Total and Goldman Sachs

The main advantage of trading using opposite Federated Total and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Total 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 Federated Total Return and Goldman Sachs Real 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.