Correlation Between Ready Capital and MFA Financial

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

Diversification Opportunities for Ready Capital and MFA Financial

0.16

Correlation Coefficient

Ready Capital  MFA Financial

Average diversification

The 3 months correlation between Ready and MFA is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ready Capital Corp and MFA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFA Financial 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 MFA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFA Financial has no effect on the direction of Ready Capital i.e., Ready Capital and MFA Financial go up and down completely randomly.

Pair Corralation between Ready Capital and MFA Financial

Allowing for the 90-day total investment horizon Ready Capital Corp is expected to generate 1.58 times more return on investment than MFA Financial. However, Ready Capital is 1.58 times more volatile than MFA Financial. It trades about -0.05 of its potential returns per unit of risk. MFA Financial is currently generating about -0.24 per unit of risk. If you would invest  738.00  in Ready Capital Corp on September 12, 2024 and sell it today you would lose (15.00) from holding Ready Capital Corp or give up 2.03% of portfolio value over 90 days.

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

Ready Capital Corp  vs.  MFA Financial

Ready Capital Corp

Risk-Adjusted Performance

0 of 100

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.

MFA Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MFA Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Ready Capital and MFA Financial

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

The idea behind Ready Capital Corp and MFA Financial 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.