Correlation Between Granite Point and Rithm Capital

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

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

Diversification Opportunities for Granite Point and Rithm Capital

0.81

Correlation Coefficient

Granite Point  Rithm Capital

Very poor diversification

The 3 months correlation between Granite and Rithm is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Granite Point Mortgage and Rithm Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rithm Capital Corp and Granite Point 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 Granite Point Mortgage are associated (or correlated) with Rithm Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rithm Capital Corp has no effect on the direction of Granite Point i.e., Granite Point and Rithm Capital go up and down completely randomly.

Pair Corralation between Granite Point and Rithm Capital

Assuming the 90 days trading horizon Granite Point Mortgage is expected to generate 2.5 times more return on investment than Rithm Capital. However, Granite Point is 2.5 times more volatile than Rithm Capital Corp. It trades about 0.14 of its potential returns per unit of risk. Rithm Capital Corp is currently generating about 0.19 per unit of risk. If you would invest  1,620  in Granite Point Mortgage on October 25, 2024 and sell it today you would earn a total of  121.00  from holding Granite Point Mortgage or generate 7.47% return on investment over 90 days.

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

Granite Point Mortgage  vs.  Rithm Capital Corp

Granite Point Mortgage

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Point Mortgage are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Granite Point may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Rithm Capital Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rithm Capital Corp are ranked lower than 14 (%) 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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Granite Point and Rithm Capital

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

The idea behind Granite Point Mortgage and Rithm 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 Global Correlations module to find global opportunities by holding instruments from different markets.