Correlation Between Invesco Mortgage and Rithm Capital

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

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

Diversification Opportunities for Invesco Mortgage and Rithm Capital

-0.35

Correlation Coefficient

Invesco Mortgage  Rithm Capital

Very good diversification

The 3 months correlation between Invesco and Rithm is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Mortgage Capital 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 Invesco Mortgage 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 Invesco Mortgage Capital 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 Invesco Mortgage i.e., Invesco Mortgage and Rithm Capital go up and down completely randomly.

Pair Corralation between Invesco Mortgage and Rithm Capital

Assuming the 90 days trading horizon Invesco Mortgage Capital is expected to generate 3.16 times more return on investment than Rithm Capital. However, Invesco Mortgage is 3.16 times more volatile than Rithm Capital Corp. It trades about 0.06 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  2,033  in Invesco Mortgage Capital on September 12, 2024 and sell it today you would earn a total of  343.00  from holding Invesco Mortgage Capital or generate 16.87% return on investment over 90 days.

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

Invesco Mortgage Capital  vs.  Rithm Capital Corp

Invesco Mortgage Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Mortgage Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Invesco Mortgage is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Rithm Capital Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rithm Capital Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Rithm Capital is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco Mortgage and Rithm Capital

The main advantage of trading using opposite Invesco Mortgage and Rithm Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Mortgage 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 Invesco Mortgage Capital 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.