Correlation Between Ready Capital and New York

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

Diversification Opportunities for Ready Capital and New York

0.82

Correlation Coefficient

Ready Capital  New York

Very poor diversification

The 3 months correlation between Ready and New is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Ready Capital Corp and New York Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New York Mortgage 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 New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New York Mortgage has no effect on the direction of Ready Capital i.e., Ready Capital and New York go up and down completely randomly.

Pair Corralation between Ready Capital and New York

Allowing for the 90-day total investment horizon Ready Capital Corp is expected to under-perform the New York. But the stock apears to be less risky and, when comparing its historical volatility, Ready Capital Corp is 1.04 times less risky than New York. The stock trades about -0.01 of its potential returns per unit of risk. The New York Mortgage is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  628.00  in New York Mortgage on September 12, 2024 and sell it today you would earn a total of  20.00  from holding New York Mortgage or generate 3.18% return on investment over 90 days.

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

Ready Capital Corp  vs.  New York Mortgage

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.

New York Mortgage

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New York Mortgage are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, New York 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 New York

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

The idea behind Ready Capital Corp and New York Mortgage 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.