Correlation Between Goldman Sachs and The Fairholme

Can any of the company-specific risk be diversified away by investing in both Goldman Sachs and The Fairholme 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 The Fairholme 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 The Fairholme Fund, you can compare the effects of market volatilities on Goldman Sachs and The Fairholme 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 The Fairholme. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and The Fairholme.

Diversification Opportunities for Goldman Sachs and The Fairholme

0.82

Correlation Coefficient

Goldman Sachs  The Fairholme

Very poor diversification

The 3 months correlation between Goldman and The is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Clean and The Fairholme Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Fairholme 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 The Fairholme. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Fairholme has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and The Fairholme go up and down completely randomly.

Pair Corralation between Goldman Sachs and The Fairholme

Assuming the 90 days horizon Goldman Sachs Clean is expected to under-perform the The Fairholme. But the mutual fund apears to be less risky and, when comparing its historical volatility, Goldman Sachs Clean is 1.12 times less risky than The Fairholme. The mutual fund trades about -0.05 of its potential returns per unit of risk. The The Fairholme Fund is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  2,966  in The Fairholme Fund on October 24, 2024 and sell it today you would earn a total of  173.00  from holding The Fairholme Fund or generate 5.83% return on investment over 90 days.

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

Goldman Sachs Clean  vs.  The Fairholme Fund

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

The Fairholme

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Fairholme Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, The Fairholme 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 The Fairholme

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

The idea behind Goldman Sachs Clean and The Fairholme Fund 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.