Correlation Between Ready Capital and CF Acquisition

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

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

Diversification Opportunities for Ready Capital and CF Acquisition

0.0

Correlation Coefficient

Ready Capital  CF Acquisition

Pay attention - limited upside

The 3 months correlation between Ready and CFFS is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ready Capital Corp and CF Acquisition VII in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Acquisition VII 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 Corp are associated (or correlated) with CF Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Acquisition VII has no effect on the direction of Ready Capital i.e., Ready Capital and CF Acquisition go up and down completely randomly.

Pair Corralation between Ready Capital and CF Acquisition

If you would invest (100.00) in CF Acquisition VII on November 29, 2024 and sell it today you would earn a total of  100.00  from holding CF Acquisition VII or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Ready Capital Corp  vs.  CF Acquisition VII

Ready Capital Corp

Risk-Adjusted Performance

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 rather sound fundamental indicators, Ready Capital is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

CF Acquisition VII

Risk-Adjusted Performance

Very Weak

Over the last 90 days CF Acquisition VII has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, CF Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ready Capital and CF Acquisition

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

The idea behind Ready Capital Corp and CF Acquisition VII 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.