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 NASDAQ and Goldman Sachs Future, 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

0.95

Correlation Coefficient

First Trust  Goldman Sachs

Almost no diversification

The 3 months correlation between First and Goldman is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and Goldman Sachs Future in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Future 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 NASDAQ 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 Future 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 2.76 times less return on investment than Goldman Sachs. In addition to that, First Trust is 1.04 times more volatile than Goldman Sachs Future. It trades about 0.06 of its total potential returns per unit of risk. Goldman Sachs Future is currently generating about 0.18 per unit of volatility. If you would invest  3,160  in Goldman Sachs Future on August 30, 2024 and sell it today you would earn a total of  165.00  from holding Goldman Sachs Future or generate 5.22% return on investment over 90 days.

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

First Trust NASDAQ  vs.  Goldman Sachs Future

First Trust NASDAQ

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust NASDAQ are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental drivers, First Trust may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Goldman Sachs Future

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Future are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite sluggish technical and fundamental indicators, Goldman Sachs may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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 NASDAQ and Goldman Sachs Future 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.