Correlation Between Goldman Sachs and First Trust

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

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

Diversification Opportunities for Goldman Sachs and First Trust

0.98

Correlation Coefficient

Goldman Sachs  First Trust

Almost no diversification

The 3 months correlation between Goldman and First is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs ActiveBeta and First Trust Horizon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Horizon 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 ActiveBeta are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Horizon has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and First Trust go up and down completely randomly.

Pair Corralation between Goldman Sachs and First Trust

Given the investment horizon of 90 days Goldman Sachs ActiveBeta is expected to generate 1.57 times more return on investment than First Trust. However, Goldman Sachs is 1.57 times more volatile than First Trust Horizon. It trades about 0.28 of its potential returns per unit of risk. First Trust Horizon is currently generating about 0.34 per unit of risk. If you would invest  3,450  in Goldman Sachs ActiveBeta on December 19, 2024 and sell it today you would earn a total of  552.00  from holding Goldman Sachs ActiveBeta or generate 16.0% return on investment over 90 days.

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

Goldman Sachs ActiveBeta  vs.  First Trust Horizon

Goldman Sachs ActiveBeta

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs ActiveBeta are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

First Trust Horizon

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Horizon are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Goldman Sachs and First Trust

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

The idea behind Goldman Sachs ActiveBeta and First Trust Horizon 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.

Check out your portfolio center.

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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.