Correlation Between Ares Commercial and Ready Capital

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

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

Diversification Opportunities for Ares Commercial and Ready Capital

0.74

Correlation Coefficient

Ares Commercial  Ready Capital

Poor diversification

The 3 months correlation between Ares and Ready is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ares Commercial Real and Ready Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ready Capital Corp and Ares Commercial 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 Ares Commercial Real are associated (or correlated) with Ready Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ready Capital Corp has no effect on the direction of Ares Commercial i.e., Ares Commercial and Ready Capital go up and down completely randomly.

Pair Corralation between Ares Commercial and Ready Capital

Given the investment horizon of 90 days Ares Commercial Real is expected to generate 0.64 times more return on investment than Ready Capital. However, Ares Commercial Real is 1.56 times less risky than Ready Capital. It trades about -0.12 of its potential returns per unit of risk. Ready Capital Corp is currently generating about -0.11 per unit of risk. If you would invest  586.00  in Ares Commercial Real on December 27, 2024 and sell it today you would lose (109.00) from holding Ares Commercial Real or give up 18.6% of portfolio value over 90 days.

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

Ares Commercial Real  vs.  Ready Capital Corp

Ares Commercial Real

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ares Commercial Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Ready Capital Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ready Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Ares Commercial and Ready Capital

The main advantage of trading using opposite Ares Commercial and Ready Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Commercial position performs unexpectedly, Ready Capital 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 Ready Capital will offset losses from the drop in Ready Capital's long position.

The idea behind Ares Commercial Real and Ready Capital Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.