Correlation Between Ready Capital and NHPBP

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

Diversification Opportunities for Ready Capital and NHPBP

-0.32

Correlation Coefficient

Ready Capital  NHPBP

Very good diversification

The 3 months correlation between Ready and NHPBP is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ready Capital Corp and NHPBP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NHPBP 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 NHPBP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NHPBP has no effect on the direction of Ready Capital i.e., Ready Capital and NHPBP go up and down completely randomly.

Pair Corralation between Ready Capital and NHPBP

Allowing for the 90-day total investment horizon Ready Capital Corp is expected to under-perform the NHPBP. In addition to that, Ready Capital is 1.46 times more volatile than NHPBP. It trades about -0.1 of its total potential returns per unit of risk. NHPBP is currently generating about 0.26 per unit of volatility. If you would invest  1,378  in NHPBP on October 25, 2024 and sell it today you would earn a total of  95.99  from holding NHPBP or generate 6.97% return on investment over 90 days.

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

Ready Capital Corp  vs.  NHPBP

Ready Capital Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ready Capital Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

NHPBP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NHPBP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, NHPBP is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Ready Capital and NHPBP

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

The idea behind Ready Capital Corp and NHPBP 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.