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 Japan, 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

0.37

Correlation Coefficient

Goldman Sachs  First Trust

Weak diversification

The 3 months correlation between Goldman and First is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs ActiveBeta and First Trust Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Japan 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 Japan 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 is expected to generate 1.37 times less return on investment than First Trust. But when comparing it to its historical volatility, Goldman Sachs ActiveBeta is 1.5 times less risky than First Trust. It trades about 0.05 of its potential returns per unit of risk. First Trust Japan is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,098  in First Trust Japan on October 27, 2024 and sell it today you would earn a total of  1,079  from holding First Trust Japan or generate 26.33% return on investment over 90 days.

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

Goldman Sachs ActiveBeta  vs.  First Trust Japan

Goldman Sachs ActiveBeta

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs ActiveBeta has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

First Trust Japan

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Japan are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking indicators, First Trust is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

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 Japan 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.