Correlation Between Fidelity Covington and Goldman Sachs

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

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

Diversification Opportunities for Fidelity Covington and Goldman Sachs

0.51

Correlation Coefficient

Fidelity Covington  Goldman Sachs

Very weak diversification

The 3 months correlation between Fidelity and Goldman is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Covington Trust 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 Fidelity Covington 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 Fidelity Covington Trust 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 Fidelity Covington i.e., Fidelity Covington and Goldman Sachs go up and down completely randomly.

Pair Corralation between Fidelity Covington and Goldman Sachs

Given the investment horizon of 90 days Fidelity Covington Trust is expected to under-perform the Goldman Sachs. In addition to that, Fidelity Covington is 1.68 times more volatile than Goldman Sachs Future. It trades about -0.05 of its total potential returns per unit of risk. Goldman Sachs Future is currently generating about 0.02 per unit of volatility. If you would invest  2,992  in Goldman Sachs Future on August 22, 2024 and sell it today you would earn a total of  221.00  from holding Goldman Sachs Future or generate 7.39% return on investment over 90 days.

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

Fidelity Covington Trust  vs.  Goldman Sachs Future

Fidelity Covington Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Covington Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Fidelity Covington is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Goldman Sachs Future

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Future are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Fidelity Covington and Goldman Sachs

The main advantage of trading using opposite Fidelity Covington and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Covington 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 Fidelity Covington Trust 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.