Correlation Between First Trust and Goldman Sachs

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

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

Diversification Opportunities for First Trust and Goldman Sachs

0.87

Correlation Coefficient

First Trust  Goldman Sachs

Very poor diversification

The 3 months correlation between First and Goldman is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Horizon and Goldman Sachs ActiveBeta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs ActiveBeta and First Trust 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 First Trust Horizon 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 ActiveBeta has no effect on the direction of First Trust i.e., First Trust and Goldman Sachs go up and down completely randomly.

Pair Corralation between First Trust and Goldman Sachs

Given the investment horizon of 90 days First Trust is expected to generate 2.45 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, First Trust Horizon is 1.3 times less risky than Goldman Sachs. It trades about 0.15 of its potential returns per unit of risk. Goldman Sachs ActiveBeta is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  3,450  in Goldman Sachs ActiveBeta on December 19, 2024 and sell it today you would earn a total of  551.60  from holding Goldman Sachs ActiveBeta or generate 15.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

First Trust Horizon  vs.  Goldman Sachs ActiveBeta

First Trust Horizon

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Horizon are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with First Trust and Goldman Sachs

The main advantage of trading using opposite First Trust and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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 First Trust Horizon and Goldman Sachs ActiveBeta 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.