Correlation Between Federated Government and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Federated Government 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 Government 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 Government Ultrashort and Goldman Sachs International, you can compare the effects of market volatilities on Federated Government 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 Government with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Government and Goldman Sachs.
Diversification Opportunities for Federated Government and Goldman Sachs
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federated and Goldman is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Federated Government Ultrashor and Goldman Sachs International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Intern and Federated Government 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 Government Ultrashort 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 Intern has no effect on the direction of Federated Government i.e., Federated Government and Goldman Sachs go up and down completely randomly.
Pair Corralation between Federated Government and Goldman Sachs
Assuming the 90 days horizon Federated Government is expected to generate 6.2 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Federated Government Ultrashort is 7.44 times less risky than Goldman Sachs. It trades about 0.25 of its potential returns per unit of risk. Goldman Sachs International is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1,288 in Goldman Sachs International on November 28, 2024 and sell it today you would earn a total of 41.00 from holding Goldman Sachs International or generate 3.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Government Ultrashor vs. Goldman Sachs International
Performance |
| Timeline |
| Federated Government |
| Goldman Sachs Intern |
Federated Government and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Government and Goldman Sachs
The main advantage of trading using opposite Federated Government and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Government 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.| Federated Government vs. Calvert Short Duration | Federated Government vs. Touchstone Ultra Short | Federated Government vs. Metropolitan West Ultra | Federated Government vs. Blackrock Global Longshort |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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