Correlation Between Rithm Capital and Goldman Sachs

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

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

Diversification Opportunities for Rithm Capital and Goldman Sachs

0.87

Correlation Coefficient

Rithm Capital  Goldman Sachs

Very poor diversification

The 3 months correlation between Rithm and Goldman is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Rithm Capital Corp and Goldman Sachs Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Group and Rithm Capital 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 Rithm Capital Corp 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 Group has no effect on the direction of Rithm Capital i.e., Rithm Capital and Goldman Sachs go up and down completely randomly.

Pair Corralation between Rithm Capital and Goldman Sachs

Assuming the 90 days trading horizon Rithm Capital is expected to generate 1.58 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Rithm Capital Corp is 1.66 times less risky than Goldman Sachs. It trades about 0.09 of its potential returns per unit of risk. Goldman Sachs Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  32,350  in Goldman Sachs Group on October 11, 2024 and sell it today you would earn a total of  25,652  from holding Goldman Sachs Group or generate 79.3% return on investment over 90 days.

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

Rithm Capital Corp  vs.  Goldman Sachs Group

Rithm Capital Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rithm Capital Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Rithm Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Goldman Sachs Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rithm Capital and Goldman Sachs

The main advantage of trading using opposite Rithm Capital and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rithm Capital 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 Rithm Capital Corp and Goldman Sachs Group 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.