Correlation Between Ready Capital and Eagle Capital

Can any of the company-specific risk be diversified away by investing in both Ready Capital and Eagle 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 Eagle Capital 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 Eagle Capital Growth, you can compare the effects of market volatilities on Ready Capital and Eagle 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 Eagle Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ready Capital and Eagle Capital.

Diversification Opportunities for Ready Capital and Eagle Capital

0.26

Correlation Coefficient

Ready Capital  Eagle Capital

Modest diversification

The 3 months correlation between Ready and Eagle is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ready Capital Corp and Eagle Capital Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Capital Growth 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 Eagle Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Capital Growth has no effect on the direction of Ready Capital i.e., Ready Capital and Eagle Capital go up and down completely randomly.

Pair Corralation between Ready Capital and Eagle Capital

Allowing for the 90-day total investment horizon Ready Capital Corp is expected to generate 1.01 times more return on investment than Eagle Capital. However, Ready Capital is 1.01 times more volatile than Eagle Capital Growth. It trades about -0.03 of its potential returns per unit of risk. Eagle Capital Growth is currently generating about -0.04 per unit of risk. If you would invest  710.00  in Ready Capital Corp on November 29, 2024 and sell it today you would lose (27.00) from holding Ready Capital Corp or give up 3.8% of portfolio value over 90 days.

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

Ready Capital Corp  vs.  Eagle Capital Growth

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.

Eagle Capital Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eagle Capital Growth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Eagle Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ready Capital and Eagle Capital

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

The idea behind Ready Capital Corp and Eagle Capital Growth 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.