Correlation Between Federated Municipal and Goldman Sachs

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

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

Diversification Opportunities for Federated Municipal and Goldman Sachs

0.05

Correlation Coefficient

Federated Municipal  Goldman Sachs

Significant diversification

The 3 months correlation between Federated and Goldman is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Federated Municipal Bond and Goldman Sachs Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Technology and Federated Municipal 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 Federated Municipal Bond 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 Technology has no effect on the direction of Federated Municipal i.e., Federated Municipal and Goldman Sachs go up and down completely randomly.

Pair Corralation between Federated Municipal and Goldman Sachs

Assuming the 90 days horizon Federated Municipal Bond is expected to generate 0.14 times more return on investment than Goldman Sachs. However, Federated Municipal Bond is 7.05 times less risky than Goldman Sachs. It trades about 0.02 of its potential returns per unit of risk. Goldman Sachs Technology is currently generating about -0.09 per unit of risk. If you would invest  949.00  in Federated Municipal Bond on December 22, 2024 and sell it today you would earn a total of  2.00  from holding Federated Municipal Bond or generate 0.21% return on investment over 90 days.

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

Federated Municipal Bond  vs.  Goldman Sachs Technology

Federated Municipal Bond

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Municipal Bond are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Federated Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goldman Sachs Technology has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Federated Municipal and Goldman Sachs

The main advantage of trading using opposite Federated Municipal and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Municipal 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 Federated Municipal Bond and Goldman Sachs Technology 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.