Correlation Between Ladder Capital and Sachem Capital

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

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

Diversification Opportunities for Ladder Capital and Sachem Capital

-0.51

Correlation Coefficient

Ladder Capital  Sachem Capital

Excellent diversification

The 3 months correlation between Ladder and Sachem is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ladder Capital Corp and Sachem Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sachem Capital Corp and Ladder 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 Ladder Capital Corp are associated (or correlated) with Sachem Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sachem Capital Corp has no effect on the direction of Ladder Capital i.e., Ladder Capital and Sachem Capital go up and down completely randomly.

Pair Corralation between Ladder Capital and Sachem Capital

Given the investment horizon of 90 days Ladder Capital Corp is expected to generate 0.23 times more return on investment than Sachem Capital. However, Ladder Capital Corp is 4.3 times less risky than Sachem Capital. It trades about 0.05 of its potential returns per unit of risk. Sachem Capital Corp is currently generating about 0.0 per unit of risk. If you would invest  1,118  in Ladder Capital Corp on December 26, 2024 and sell it today you would earn a total of  39.00  from holding Ladder Capital Corp or generate 3.49% return on investment over 90 days.

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

Ladder Capital Corp  vs.  Sachem Capital Corp

Ladder Capital Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ladder Capital Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Ladder Capital is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Sachem Capital Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sachem Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Sachem Capital is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Ladder Capital and Sachem Capital

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

The idea behind Ladder Capital Corp and Sachem 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..