Correlation Between Franklin Federal and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Franklin Federal 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 Franklin Federal and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Federal Limited Term and Goldman Sachs Global, you can compare the effects of market volatilities on Franklin Federal 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 Franklin Federal with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Federal and Goldman Sachs.
Diversification Opportunities for Franklin Federal and Goldman Sachs
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Franklin and Goldman is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Limited Term and Goldman Sachs Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Global and Franklin Federal 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 Franklin Federal Limited Term 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 Global has no effect on the direction of Franklin Federal i.e., Franklin Federal and Goldman Sachs go up and down completely randomly.
Pair Corralation between Franklin Federal and Goldman Sachs
Assuming the 90 days horizon Franklin Federal is expected to generate 1.27 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Franklin Federal Limited Term is 6.8 times less risky than Goldman Sachs. It trades about 0.23 of its potential returns per unit of risk. Goldman Sachs Global is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,016 in Goldman Sachs Global on August 31, 2024 and sell it today you would earn a total of 8.00 from holding Goldman Sachs Global or generate 0.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Federal Limited Term vs. Goldman Sachs Global
Performance |
| Timeline |
| Franklin Federal Lim |
| Goldman Sachs Global |
Franklin Federal and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Federal and Goldman Sachs
The main advantage of trading using opposite Franklin Federal and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Federal 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.| Franklin Federal vs. Pro Blend Moderate Term | Franklin Federal vs. Wisdomtree Siegel Moderate | Franklin Federal vs. Blackrock Moderate Prepared | Franklin Federal vs. Lifestyle Ii Moderate |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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