Correlation Between Regional Management and Goldman Sachs

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

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

Diversification Opportunities for Regional Management and Goldman Sachs

0.85

Correlation Coefficient

Regional Management  Goldman Sachs

Very poor diversification

The 3 months correlation between Regional and Goldman is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Regional Management 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 Regional Management 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 Regional Management 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 Regional Management i.e., Regional Management and Goldman Sachs go up and down completely randomly.

Pair Corralation between Regional Management and Goldman Sachs

Allowing for the 90-day total investment horizon Regional Management Corp is expected to under-perform the Goldman Sachs. In addition to that, Regional Management is 1.05 times more volatile than Goldman Sachs Group. It trades about -0.06 of its total potential returns per unit of risk. Goldman Sachs Group is currently generating about -0.03 per unit of volatility. If you would invest  57,072  in Goldman Sachs Group on December 28, 2024 and sell it today you would lose (2,760) from holding Goldman Sachs Group or give up 4.84% of portfolio value over 90 days.

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

Regional Management Corp  vs.  Goldman Sachs Group

Regional Management Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regional Management Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Goldman Sachs Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goldman Sachs Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Goldman Sachs is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Regional Management and Goldman Sachs

The main advantage of trading using opposite Regional Management and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regional Management 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 Regional Management 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 CEOs Directory module to screen CEOs from public companies around the world.