Correlation Between Real Estate and Ready Capital

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

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

Diversification Opportunities for Real Estate and Ready Capital

-0.25

Correlation Coefficient

Real Estate  Ready Capital

Very good diversification

The 3 months correlation between Real and Ready is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Real Estate Securities 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 Real Estate 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 Real Estate Securities 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 Real Estate i.e., Real Estate and Ready Capital go up and down completely randomly.

Pair Corralation between Real Estate and Ready Capital

Assuming the 90 days horizon Real Estate Securities is expected to generate 0.58 times more return on investment than Ready Capital. However, Real Estate Securities is 1.72 times less risky than Ready Capital. It trades about 0.05 of its potential returns per unit of risk. Ready Capital Corp is currently generating about -0.01 per unit of risk. If you would invest  2,398  in Real Estate Securities on September 21, 2024 and sell it today you would earn a total of  597.00  from holding Real Estate Securities or generate 24.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.57%
Values	Daily Returns

Real Estate Securities  vs.  Ready Capital Corp

Real Estate Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Estate Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Real Estate is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Ready Capital Corp

Risk-Adjusted Performance

0 of 100

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 latest inconsistent performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Real Estate and Ready Capital

The main advantage of trading using opposite Real Estate and Ready Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Estate 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 Real Estate Securities 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.

Check out your portfolio center.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.