Correlation Between Ready Capital and Highwoods Properties

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

Diversification Opportunities for Ready Capital and Highwoods Properties

-0.4

Correlation Coefficient

Ready Capital  Highwoods Properties

Very good diversification

The 3 months correlation between Ready and Highwoods is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ready Capital Corp and Highwoods Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highwoods Properties 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 Highwoods Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highwoods Properties has no effect on the direction of Ready Capital i.e., Ready Capital and Highwoods Properties go up and down completely randomly.

Pair Corralation between Ready Capital and Highwoods Properties

Allowing for the 90-day total investment horizon Ready Capital Corp is expected to under-perform the Highwoods Properties. In addition to that, Ready Capital is 1.44 times more volatile than Highwoods Properties. It trades about -0.06 of its total potential returns per unit of risk. Highwoods Properties is currently generating about 0.06 per unit of volatility. If you would invest  3,124  in Highwoods Properties on September 1, 2024 and sell it today you would earn a total of  122.00  from holding Highwoods Properties or generate 3.91% return on investment over 90 days.

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

Ready Capital Corp  vs.  Highwoods Properties

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 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.

Highwoods Properties

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Highwoods Properties are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, Highwoods Properties is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ready Capital and Highwoods Properties

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

The idea behind Ready Capital Corp and Highwoods Properties 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.