Correlation Between Goldman Sachs and Franklin Mutual

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

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

Diversification Opportunities for Goldman Sachs and Franklin Mutual

0.7

Correlation Coefficient

Goldman Sachs  Franklin Mutual

Poor diversification

The 3 months correlation between Goldman and Franklin is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Global and Franklin Mutual Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Global 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 Global are associated (or correlated) with Franklin Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual Global has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Franklin Mutual go up and down completely randomly.

Pair Corralation between Goldman Sachs and Franklin Mutual

Assuming the 90 days horizon Goldman Sachs is expected to generate 10.21 times less return on investment than Franklin Mutual. In addition to that, Goldman Sachs is 1.44 times more volatile than Franklin Mutual Global. It trades about 0.02 of its total potential returns per unit of risk. Franklin Mutual Global is currently generating about 0.23 per unit of volatility. If you would invest  2,774  in Franklin Mutual Global on December 22, 2024 and sell it today you would earn a total of  261.00  from holding Franklin Mutual Global or generate 9.41% return on investment over 90 days.

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

Goldman Sachs Global  vs.  Franklin Mutual Global

Goldman Sachs Global

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Global are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. 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.

Franklin Mutual Global

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Mutual Global are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Franklin Mutual may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Goldman Sachs and Franklin Mutual

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

The idea behind Goldman Sachs Global and Franklin Mutual Global 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.