Correlation Between Ready Capital and Rithm Capital

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

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

Diversification Opportunities for Ready Capital and Rithm Capital

-0.64

Correlation Coefficient

Ready Capital  Rithm Capital

Excellent diversification

The 3 months correlation between Ready and Rithm is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Ready 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 Ready 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 Ready 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 Ready Capital i.e., Ready Capital and Rithm Capital go up and down completely randomly.

Pair Corralation between Ready Capital and Rithm Capital

Assuming the 90 days horizon Ready Capital is expected to generate 2.61 times less return on investment than Rithm Capital. But when comparing it to its historical volatility, Ready Capital is 1.12 times less risky than Rithm Capital. It trades about 0.05 of its potential returns per unit of risk. Rithm Capital Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,520  in Rithm Capital Corp on September 23, 2024 and sell it today you would earn a total of  939.00  from holding Rithm Capital Corp or generate 61.78% return on investment over 90 days.

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

Ready Capital  vs.  Rithm Capital Corp

Ready Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ready Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Ready Capital 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

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rithm Capital Corp are ranked lower than 11 (%) 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ready Capital and Rithm Capital

The main advantage of trading using opposite Ready Capital and Rithm Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ready Capital 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 Ready 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 Transaction History module to view history of all your transactions and understand their impact on performance.